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GOMPFxNDIUM 


TRANSPORTATION  THEORIES, 


Kensington  Series.— First  Book. 


A   Compilation   of   Essays    upon   Transportation   Sibjects 
BY  Eminent  Experts. 


Publication  of  Series  under  Direction  (jf 
C.  C.  IVlcCAIN. 


WASHINGTON,    D.    C.  : 

KENSINGTON    PUBLISHING   COMPANY 

1893. 


V  \ 


COPYRIGHTED    BY 

C.  C.  McCain. 


' '  The  best  that  we  can  do  for  one  another 
is  to  exchange  our  thoughts  freely,  and  that 
after  all  is  but  little." 

— Froude. 


317055 


Digitized  by  the  Internet  Archive 

in  2007  with  funding  from 

IVIicrosoft  Corporation 


http://www.archive.org/details/compendiumoftranOOmccarich 


conte:nxs. 


1.  The  Railway  Problem  Defined,     Hon.  Thomas  M.  Cooley. 

2.  The  Railroad  Malady  and  its  Treatment.     Hon.  Augustus  Schoonmaker. 

3.  The  Railroad  Problem.     Hon.  Joseph  D.  Potts. 

4.  The  Public  and  the  Railways.     Hon.  Shelby  M.  Cullom. 

5.  The  Railroads  and  the  Public.     Mr.  Frank  J.  Firth. 

6.  The  Future  of  the  Railroad  Problem.     Mr.  A.  B.  Stickney. 

7.  Unity  of  Railways  and  Railway  Interests.     Hon.  Augustus  Schoonmaker. 
•  8.    The  American  Railroad  System.     Hon.  Joseph  Nimmo,  Jr. 

9.    Federal  Regulation  of  Commerce.     Hon.  Shelby  M.  Cullom. 

10.  Federal  Regulation  of  Commerce.     A  Reply.     Mr.  George  R.  Blanchard. 

11.  Limitations  upon  Railway  Powers.     Hon.  Augustus  Schoonmaker. 

12.  Railway  Legislation.     Hon.  Walter  D.  Dabney. 

13.  Amendment  of  the  Interstate  Commerce  Law.     Hon.  Aldace  F.  Walker. 

14.  Legal  Aspects  of  Railroad  Strikes.     General  Wager  Swayne. 

15.  Services  of  a  Bureau  of  Railway  Statistics.     Professor  Henry  C.  Adams. 

16.  English  and  American  Railways.     Mr.  W.  M.  Acworth. 

17.  High  Speed  Railroad  Travel.     Mr.  Theodore  Voorhees. 

18.  Relations  between  Canadian  and  American  Railways.      Mr.  A.  C.  Ray- 

mond. 

19.  Some  Characteristics  of  the  American  Railway   System.     Hon.    Joseph 

Nimmo,  Jr. 

20.  Development  of  Railway  Freight  Classifications.     Mr.  C.  C.  McCain. 

21.  The  Interstate  Commerce  Law.     Hon.  Charles  Francis  Adams. 

22.  Discrimination  by  Railways.     Hon.  Martin  A.  Knapp. 

23.  Discriminations  from  the  use  of  Private  Cars  of  Shippers.     Hon.  Augus- 

tus Schoonmaker. 

24.  Long  versus  Short  Haul.     General  E.  P.  Alexander. 

25.  Treatment  of  Railway  Employees.     Mr.  B.  B.  Adams. 

26.  Brotherhood  of  Engineers.     Mr.  Nat.  Sawyer. 

27.  The  Necessity  of  Raihvay  Compacts  under  Governmental  Regulation. 

Mr.  James  Peabody. 

28.  Apportionment  of  Traffic.     Hon.  Joseph  Nimmo,  Jr. 

29.  Popular  and  Legal  View  of  Traffic  Pooling.     Hon.  Thomas  M.  Cooley. 

30.  Pooling  and  Combinations.     Hon.  Thomas  M.  Cooley. 

31.  A  Plea  for  Railway  Consolidation.     Mr.  Collis  P.  Huntington. 

32.  Railroad  Consolidation.     General  E.  P.  Alexander. 

33.  Government  Interference  m  English  Railway  Management.     Mr.  W.  M. 

Acworth. 

34.  Railway  Associations.     Hon.  Aldace  F.  Walker. 


THE   RAILWAY   PROBLEA\   DEriNED. 

Address  of  Hon.  Thos.  M.  Coo  ley. 

Our  purpose  in  coming-  together  on  this  occasion  is  for  consulta- 
tion upon  subjects  of  mutual  interest,  and  for  the  discussion  of 
questions  which  either  pertain  directly  to  the  official  duties  we 
have  severally  taken  upon  ourselves,  or  which  have  at  least  some 
bearing  upon  the  proper  performance  of  those  duties.  We  are 
not  all  clothed  with  the  same  powers ;  there  has  not  been  prescribed 
for  all  of  us  the  like  obligations ;  but  in  our  official  action  we  all 
have  the  same  general  purpose  in  contemplation,  and  it  may  justly 
be  assumed  that  the  views  we  may  severally  hold  will  be  of  com- 
mon interest,  and  that  in  so  far  as  there  has  been  experience  in 
dealing  with  practical  questions,  this  experience  will  be  not  inter- 
esting merely  but  of  high  value. 

It  has  been  assumed  by  the  people  in  creating  the  offices  which 
are  represented  in  this  meeting,  that  there  are  mischiefs,  of  some 
considerable  magnitude  in  the  railroad  service  of  the  country;  and 
the  existence  of  these  mischiefs  is  the  justification  for  creating 
such  offices.  No  class  of  persons  in  the  country  will  admit  more 
freely  the  existence  of  serious  evils  than  those  who  are  managers 
of  the  railroads  or  who  are  interested  as  stockholders  or  bond- 
holders in  the  results  of  the  management;  but  as  this  class  look 
upon  the  existing  evils  from  the  standpoint  of  corporate  interests, 
they  are  likely  to  see  them  as  they  exist  mostly  in  the  relations 
between  the  roads  themselves,  while  the  public,  regarding  them 
from  a  different  standpoint,  naturally  see  most  distinctly  the  mis- 
chiefs which  spring  from  the  relations  of  the  railroads  to  their 
customers  or  which  affect  the  political  society. 

When  the  legislation  which  was  intended  to  bring  the  transpor- 
tation business  of  the  country  under  public  control  was  first  entered 
upon,  there  w^ere  persons  interested  as  managers  or  otherwise  in 
railroad  property,  and  possibly  some  others,  who  denied  that  any 
such  legislation  Avas  fairly  warranted  by  just  principles  of  consti- 
tutional law.  This  denial  is  not  often  heard  now,  but  it  is  very 
generally  conceded  that  inasmuch  as  the  railway  is  a  public 
agency,  its  management  is  a  public  trust ;  and  that  as  such  it  is  as 

Reprinted  from  Proceedings  of  National  Convention  of  Railrdad  Commissioners  held  at 

Washmgton,  March,  1891. 


8  THE  RAILWAY  PROBLEM  DEFINED. 

legitimately  to  be  regulated  by  law  as  is  the  management  of  any 
other  trust  in  which  the  public  are  directly  concerned.  There  are 
doubtless  still  some  persons,  however,  who  believe  that  in  point 
of  policy,  public  regulation  was  uncalled  for  at  the  time  it  was 
entered  upon,  and  that  the  results  will  not  justify  the  expectations 
upon  which  the  legislation  hitherto  adopted  has  been  based.  This 
last  proposition,  I  do  not  see  that  this  convention  need  care  to 
controvert.  It  is  likely  to  be  the  case  with  all  attempts  at  import- 
ant reforms  in  public  affairs,  that  the  results  will  not  equal  the 
antecedent  expectations ;  and  one  of  the  consequences  must  be, 
that  those  who  are  officially  connected  with  the  effort  will  be  com- 
pelled to  share  among  them,  to  some  extent,  the  blame  that 
inevitably  follows  the  impossibility  of  giving  complete  satisfaction 
to  extravagant  hopes. 

Whether  the  views  of  those  who  have  not  favored  public  regula- 
tion of  railways  are  or  are  not  justified  by  the  situation,  or  by  the 
prospects  for  the  future,  it  seems  to  be  taken  for  granted  now 
that  statutes  for  the  purpose  not  likely  to  have  a  place  among 
the  laws  for  an  indefinite  period ;  though  to  what  extent  they 
shall  go  in  regulation,  and  how  far  they  may  justly  and  properly 
subordinate  the  interests  of  stockholders  and  bondholders  to  the 
rights  and  convenience  of  the  general  public,  are  questions  upon 
which  the  differences  of  opinion  are  not  likely  to  be  reconciled, 
and  may  be  expected  to  be  hereafter,  as  they  are  now,  somewhat 
radical.  There  are  many  who  believe  that  the  Government 
should  not  regulate  merely,  but  should  manage  the  roads;  that  its 
hand  should  be  felt  continuously  and  everywhere;  while  others 
look  upon  the  existing  legislation  as  having  gone  quite  as  far  as 
can  be  justified  by  the  expectation  of  useful  results.  Others,  hold- 
ing views  differing  from  both  these  classes,  might  be  mentioned, 
but  it  is  not  important :  the  future  alone,  after  much  more  practi- 
cal experience  than  the  coimtry  has  had  as  yet,  will  determine 
which  of  them,  if  indeed  any,  are  right  in  their  anticipations  and 
prophecies.  For  our  present  purpose  it  is  sufficient  for  us  to  say, 
that  it  is  agreed  on  all  hands  by  those  who  undertake  to  deal  with 
the  subject  of  railway  regulation,  that  there  are  many  evils  here 
which  ought  to  be  remedied;  and  whoever  speaks  of  these  evils 
is  likely  in  general  terms  to  talk  of  a  "railroad  problem"  to  be 
solved :  those  interested  in  the  roads  for  the  reason  already  men- 
tioned appearing  to  look  for  it  mainly  in  the  relations  between  the 
roads  themselves,  while  others  regard  it  as  existing  somewhere  in 
the  defective  performance  by  the  roads  of  their  public  duties,  and 
therefore,  perhaps  to  be  solved  through  the  exercise  of  such  gov- 
ernmental power  as  shall  compel  proper  performance. 

It  is  a  noticeable  fact  that  when  this  railroad  problem  is  spoken 
of,  the  mention  is  likely  to  be  vague  and  indefinite,  whether  it  is 
receiving  attention  at  the  hands  of  those  representing  the  roads 
or  from  those  who  speak  in  the  interests  of  political  economy,  or 


THE  RAILWAY  PROBLEM  DEFINED.  9 

as  representing  the  public  authorities.  If  a  legal  discussion  is 
being  had,  however  narrow  may  be  the  point  involved,  the  parties 
are  not  unlikely  to  make  use  of  this  phrase  "railroad  problem," 
as  if  a  decision  upon  the  matter  then  in  controversy  was  to  solve  the 
problem,  or  at  least  was  to  dispose  of  some  portion  or  lead  up  to  some 
final  solution.  This  same  phrase  may  be  used  in  the  very  next 
controversy,  though  equally  narrow,  but  quite  different,  and  the 
same  expectation  of  the  result  may  seem  to  be  in  the  minds  of  those 
who  represent  the  contestants.  When,  however,  public  authorities 
are  making  use  of  a  phrase  which  pertains  to  their  official  duties, 
and  which  to  the  mind  of  the  hearer  may  seem  to  indicate 
their  understanding  of  what  their  jurisdiction  is,  in  part  or  in 
whole,  it  is  important  that  they  employ  the  phrase  with  some  degree 
of  exactitude ;  and  perhaps  no  better  use  can  be  made  of  the  open- 
ing hour  of  our  meeting  than  to  devote  it  to  an  endeavor  to  ascer- 
tain precisely  what  it  is  that  is  meant  by  the  "railroad  problem," 
not  merely  when  it  is  used  by  ourselves,  but  also  when  it  is  used 
by  those  who  are  connected  directly  with  railroad  management. 
In  doing  this,  however,  we  shall  be  under  the  necessity  of  going 
beyond  the  terms  employed  in  the  several  acts  of  legislation  under 
which  we  are  acting,  for  in  none  of  them  is  this  phrase  defined : 
the  laws  point  out  the  scope  of  our  duties,  and  it  is  easy  to  see  that 
many  of  these  are  of  minor  importance  and  stand  by  themselves, 
so  that  they  cannot  be  considered  with  reason  as  constituting  a 
part  of  any  great  problem;  while  the  evils  at  which  others  are 
aimed  may  possibly  be  traced  to  a  common  source,  and  the  correc- 
tion of  one  through  the  proper  treatment  of  that  common  source, 
may  be  a  correction  of  the  others  also.  Certainly  nothing  can 
fairly  be  dignified  with  the  appellation  of  "railroad  problem" 
which  does  not  concern  the  foundation  cause  or  causes  of  the 
principal  evils  which  in  the  railroad  service  beget  injury  or 
annoyance  and  excite  complaint. 

In  an  attempt  to  ascertain  what  the  railroad  problem  (treating 
the  designation  in  the  sense  indicated)  must  be  held  to  be,  it  may 
be  well  at  first  to  point  out  what  it  is  not;  and  this  I  shall  now 
proceed  to  do. 

It  is  certainly  not  to  be  found  in  the  legislation  authorizing  the 
building  of  railroads,  or  in  that  which  prescribes  the  terms  and 
conditions  under  which  the  building  shall  be  carried  on  and  com- 
pleted. It  is  imfortunate  no  doubt  that  the  laws  for  this  purpose 
are  so  wanting  in  homogeneity,  and  in  provisions  for  the  protec- 
tion against  the  mischiefs  with  which  the  exercise  of  such  important 
powers,  when  they  may  be  assumed  by  any  one  at  discretion,  are 
likely  to  be  attended.  The  authority  comes  in  the  main  from  the 
legislation  of  the  states  and  territories;  and  if  we  examine  these 
we  shall  find  that  apparently  the  most  important  object  in  the 
minds  of  the  law-makers  in  granting  charters  of  incorporation  for 
railroads,  or  in  passing  general  laws  which  shall  stand  in  the  place 


lo  THE  RAILWAY  PROBLEM  DEFINED. 

of  such  charters,  has  been  to  invite  and  secure  the  construction ; — 
to  invite  capitaHsts,  or  others  who  can  secure  capital  by  whatever 
means  for  the  purpose,  to  expend  it  to  that  end ;  and  that  with 
this  object  in  view  they  have  been  far  more  anxious  to  make  their 
legislation  satisfactory  to  the  promoters  of  roads  than  they  have 
been  to  take  care  to  satisfy  themselves  that  the  building  of  a 
particular  road  is  important  on  public  grounds,  or  that  the  road 
when  constructed  will,  in  the  service  it  will  perform,  meet  a  public 
demand.  In  every  section  of  the  country,  instances  may  be 
pointed  out  of  roads  which  have  been  built  without  any  legitimate 
demand  for  them  whatever,  so  that  the  money  invested  in  them 
has  for  the  most  part  been  as  completely  wasted  as  if  it  had  been 
sunk  in  the  sea.  Either  there  has  been  no  sufficient  traffic  that 
at  fair  rates  would  support  them  when  built  and  keep  them  in 
suitable  condition,  or  the  traffic  of  the  region  which  must  support 
them  was  already  so  far  provided  for  that  a  new  road  could  only 
come  in  as  a  disturbing  factor,  to  render  those  already  in  existence 
unprofitable,  or  to  force  itself  upon  them  as  a  marketable  com- 
modit)?-  under  circumstances  which  could  be  considered  as  little 
less  than  the  levying  of  black-mail.  There  is  reason  for  saying 
that  when  the  interest  of  the  whole  country  is  considered,  it  would 
be  better  if  the  necessity  or  propriety  of  every  proposed  new  road 
were  required  to  be  passed  upon  by  competent  public  authority 
before  the  state  should  delegate  to  anyone  the  eminent  domain  to 
be  employed  for  its  construction ;  but  this  is  not  now  required,  and 
under  existing  laws,  a  new  railway  project  is  in  very  many  cases 
little  more  than  a  mere  demand  by  mercenary  speculators  upon 
the  credulity  of  the  public,  who,  understanding  very  little  about 
the  elements  that  must  constitute  railroad  prosperity,  are  ready 
enough  to  believe  that  riches  are  to  be  found  in  any  plausible 
scheme  that  projectors  put  before  them.  In  some  instances,  we 
feel  warranted  in  saying  that  the  building  of  a  road  is  entered 
upon  with  a  full  understanding,  by  those  who  plan  and  manage 
the  construction,  that  the  road  itself,  when  complete,  can  have  no 
value  to  stockholders  except  as  a  means  of  forcing  the  owners  of 
roads  already  in  existence  and  performing  valuable  service  to  the 
country,  to  pay  for  that  which  has  no  intrinsic  value,  a  price 
measured  by  its  power  to  do  mischief. 

There  is  an  evil  here  which  is  of  no  small  magnitude ;  it  may  be 
measured  in  part  by  the  millions  which  credulous  people,  often 
people  of  very  small  means,  have  invested  in  worthless  roads,  but 
in  part  also  by  other  millions  which  have  been  paid  for  roads 
which  even  those  who  built  them  knew  were  not  called  for. 
Nevertheless,  the  great  mass  of  the  people  of  the  country  are  only 
indirectly  injured  by  the  construction  of  such  roads.  The  roads 
do  not  go  out  of  existence  even  though  it  be  fully  demonstrated 
they  ought  never  to  have  been  built:  everyone  of  them  has  local 
communities  more   or  less  numerous  for  which  it  performs  con- 


THE  RAILWAY  PROBLEM  DEFINED.  ,  n 

venient  service :  they  come  into  business  relations  with  the  other 
roads  of  the  country ;  their  operations  are  likely  to  be  conducted 
in  the  same  methods  as  those  of  other  roads ;  and  the  great  rail- 
way questions  which  concern  and  disturb  the  public,  as  well  as 
those  which  trouble  the  railroad  world,  are  likely  to  remain  the 
same  and  to  require  the  same  discussion  and  demand  the  same 
final  settlement  as  would  have  been  essential  if  these  needless 
roads  had  never  been  constructed. 

The  "railroad  problem" is  also  not  to  be  found  in  the  condition 
in  which  the  roads  may  be  put  by  the  projectors'  or  managers,  or 
the  manner  in  which  they  are  equipped  for  the  purposes  of  opera- 
tion. A  road  in  bad  condition  is  likely,  for  that  reason,  to  cause 
great  annoyance  to  the  general  public  and  to  its  customers.  It 
may  result  in  great  delays  and  possibly  in  the  loss  of  life  as  well 
as  of  property:  a  road  badly  equipped  may  also, 'for  that  cause,  be 
of  little  or  no  service  to  the  community ;  it  may  possibly  be  even 
detrimental,  as  standing  in  the  way  of  something  better.  But 
commonly  the  difficulties  which  are  found  to  arise  from  these 
deficiencies  in  construction  or  equipment  are  of  a  minor  character 
and  do  not  to  any  great  extent  affect  the  general  public.  They 
certainly  do  not  rise  to  thg  dignity  of  being  considered  the  ' '  rail- 
road problem  "  of  the  age.  Neither  are  they  likely  to  any  very 
great  extent  to  affect  the  relations  of  the  roads  with  each  other ; 
and  we  must  therefore  assume  that  the  problem  which  we  are  en- 
deavoring to  indicate  and  define  .would  exist  in  nearly  the  same 
force  as  now,  were  these  deficiences  entirely  cured :  if,  in  other 
words,  every  road  was  in  perfect  condition  and  w^as  fully  equipped 
for  any  business  likely  to  be  offered  to  it.  In  point  of  fact,  if  we 
examine  the  roads  of  the  country,  we  are  not  unlikely  to  be  led  to 
the  conclusion  that  the  equipment  of  roads  may  also  go  beyond 
any  just  demand  that  business  makes  upon  it,  as  well  as  fall  short 
of  the  proper  business  necessity.  This  is  especially  the  case  with 
the  preparation  made  for  passenger  service,  since  the  earnest  and 
somewhat  bitter  competition  that  has  existed  between  the  leading 
lines  of  the  country  has  begotten  an  extravagance  in  equipment 
which  presents  us  the  spectacle  of  palaces  moving  on  wheels 
across  the  continent  and  inviting  the  traveling  public,  when  upon 
journeys  which  but  a  few  years  ago  could  only  be  made  under 
circumstances  of  great  hardship  and  privation,  to  a  participation 
now  in  comforts  and  even  luxuries  which  in  the  case  of  most  of 
them  are  quite  beyond  their  ordinary  life  at  home.  But  this 
causes  no  complaint:  the  railroad  company  voluntarily  supplies 
the  luxuries  and  the  traveling  public  voluntarily  pay  for  and  enjoy 
them. 

If  the  freight  traffic  is  not  provided  for  bountifully  and  extrava- 
gantly, it  is  but  just  to  say  for  the  roads  that  deficiences  are  not 
ofter-^^rious,  and  when  they  are  met  with  are  usually  found  to 
existv.  the  case  of  roads  which  have  come  into  existence  under 


12  ,  THE  RAILWAY  PROBLEM  DEFINED. 

circumstances  of  doubtful  expediency,  and  which  since  their  con- 
struction have  been  unable  to  command  the  business  that  would 
secure  and  keep  up  their  adequate  equipment.  But  any  amount 
of  imperfection  in  these  particulars  will  at  most  only  touch  upon 
outlying  questions  affecting-  slightly  the  railroad  problem  and  not 
the  main  problem  itself. 

The  relations  between  the  railroad  corporations  and  their  em- 
ployes do  not  present  the  "  railroad  problem  "  that  is  troubling 
the  country.  We  may  say  this  with  great  confidence  because 
neither  the  corporations  themselves  nor  their  employes  seem  to 
take  a  different  view,  and  because  also  most  of  the  laws  which 
undertake  to  provide  for  the  regulation  of  railways  do  not  confer 
upon  the  authorities  which  they  create  for  the  purpose  any  juris- 
diction over  these  relations.  It  is  no  doubt  true  that  the  public 
authorities  might  with  entire  propriety  take  them  somewhat  under 
consideration,  since  it  not  infrequently  happens  that  the  just  per- 
formance of  their  own  duties  is  impeded,  or  to  some  extent  at 
least  disturbed  by  the  disputes  which  arise  in  railroad  service, 
and  by  the  controversies  which  sometimes  injuriously  affect  public 
transportation  in  considerable  sections  of  the  country.  It  might 
not  only  be  admissible  but  important,  and  even  a  matter  of  duty, 
that  in  some  cases  railroad  commissions  should  recommend  legis- 
lation bearing  upon  these  relations;  legislation,  for  example,  in 
regard  to  the  use  of  machinery  better  calculated  to  protect 
employes  against  injury  or  loss  pf  life ;  and  legislation  that  would 
tend  to  lessen  the  injurious  consequences  of  disturbances  that 
arise  over  the  question  of  wages,  or  of  the  unjust  discharge  of 
faithful  servants.  Possibly  also  it  might  be,  if  not  strictly  within 
their  province,  certainly  not  foreign  to  their  duties,  to  recommend 
to  the  railroads  of  the  country  and  to  the  employes  the  adoption 
of  some  system  of  insurance,  under  which  either  the  railroad  com- 
panies or  the  employes  themselves,  by  some  general  rule  of  vol- 
untary adoption,  should  provide  a  fund  for  the  protection  of  fami- 
lies against  the  evils  of  poverty  and  destitution,  especially  in  cases 
of  accident  resulting  in  death  or  in  inability  to  perform  labor. 
But  whatever  may  be  done  on  this  subject,  the  fact  would 
remain  that  after  all  that  was  possible  had  been  considered  and 
provided  for  by  the  parties  to  this  service  in  regard  thereto,  the 
great  railroad  problem  would  still  remain  unsolved,  and  still 
demanding  the  best  attention  of  railroad  managers  and  of  the 
public  authorities.  The  relation  of  employer  and  employe  touches 
it  but  lightly ;  and  even  on  occasions  when  strikes  affect  the  busi- 
ness of  large  sections  of  the  country,  so  as  to  seem  for  the  time 
being  to  make  the  relation  between  the  strikers  and  their  employers 
more  important  than  anything  else  in  those  sections,  yet  they  are 
seldom  of  such  magnitude  that  the  business  of  the  country  at  large 
is  seriously  disturbed,  and  they  are  seldom  of  long  continuance; 
so  that  if  they  constituted  the  only  difficulties  in  railway  service, 


THE  RAILWAY  PROBLEM  DEFINED.  13 

the  mischiefs  which  are  felt  on  all  hands  would  be  far  less  serious 
than  now;  and  it  it  can  scarcely  be  doubted  that  they  would  find 
speedy  and  satisfactory  solution. 

The  "  railroad  problem  "  is  not  to  be  found,  exclusively  at  least, 
in  the  diversities  which  exist  between  the  legislation  of  the  several 
states  when  compared  with  each  other,  or  between  the  same  legis- 
lation when  compared  with  that  of  the  Federal  Government. 
These  diversities  necessarily  aggravate  the  existing  difficulties  and 
constitute  obstacles  in  the  way  of  the  speedy  and  effectual  removal 
of  some  of  the  worst  in  which  the  general  public  is  concerned; 
but  the  difficulties  existing  in  the  relations  between  the  roads 
themselves  are  affected  but  slightly  by  differences  in  legislation. 
Remove  these,  and  the  clashing  of  interests  between  the  roads 
will  be  the  same  as  now:  the  temptation  to  unfriendly  action  for 
the  very  purpose  of  inflicting  injury  upon  rivals  or  of  embarrassing 
their  operations  with  a  view  to  forcing  what  cannot  be  accomplished 
by  negotiation,  will  be  as  strong  as  ever.  I  need  not  enlarge  upon 
this  for  it  is  obvious ;  and  so  long  as  the  fact  is  as  stated  the  rail- 
road problem  must  remain,  whatever  may  be  the  laws  that  state 
or  territory  or  nation  may  have  passed  and  enforced  in  mitigation 
of  the  evils. 

The  "railroad  problem"  is  not  to  be  found  altogether  in  the 
fact  that  railroad  rates  are  supposed  by  the  public  to  be  in  a  great 
many  cases  much  too  high ;  or  that  there  is  unlawful  discrimina- 
tion in  the  transportation  of  freights  and  of  passengers,  and  that 
many  persons  are  carried  free  who  are  not  entitled  to  it  by  law ; 
or  that  in  the  cases  in  which  exceptions  are  made  by  law  to  the 
general  rules  which  are  prescribed,  the  railroad  corporations  con- 
trive to  increase  these  exceptions  in  inadmissible  or  unwise  ways 
to  the  detriment  of  their  own  revenues,  or  to  the  increase  of  the 
charges  that  are  made  against  the  community  in  general.  The 
problem  without  question  is  present  here,  but  not  in  its  entirety. 
There  is  no  reasonable  doubt  that  railroad  charges  are  often  made 
higher  than  they  should  be.  This  is  sometimes  made  clear  on  an 
investigation  into  the  facts,  where  those  who  make  them  are  given 
the  amplest  opportunity  to  justify  their  rates  if  they  can  do  so. 
And  it  may  not  unjustly  be  said  that  they  themselves  in  many 
cases  furnish  evidence  of  more  or  less  conclusive  nature  that  the 
public  complaints  are  not  without  foundation:  they  do  so  when 
they  cut  rates  in  the  warfare  with  each  other  to  an  extent  that 
greatly  reduces  their  annual  income  and  still  leaves  them  in  a  con- 
dition to  make  respectable  dividends  to  stockholders.  They  also 
furnish  evidence  tending  in  the  same  direction  when  they  carry 
great  numbers  of  persons  free  of  charge ;  a  number  which  we  hope 
is  diminishing  from  year  to  year,  but  which  nevertheless,  when 
the  whole  country  is  considered,  is  still  enormous;  embracing  as 
it  does  among  the  private  citizens  who  are  thus  favored,  not  the 
men  of  small  means  to  whom  the  charge  of  transportation  would 


14  THE  RAILWAY  PROBLEM  DEFINED. 

be  a  serious  burden  and  must  therefore  very  much  restrict  their 
means  of  indulgence,  but  the  men  of  large  means  who,  because 
they  are  such,  have  no  claim  whatever  to  the  favor;  embracing 
also  officials  of  all  grades,  and  especially  such  as  are  empowered 
to  make  state  and  municipal  laws  or  regulations  bearing  upon  the 
subject  of  railway  management.  The  discredit  into  which  the 
use  of  the  ordinary  evidence  of  a  right  to  free  transportation  has 
fallen  is  so  great,  that  both  the  corporations  and  the  persons  who 
receive  it  deem  it  politic  to  resort  to  other  devices,  the  most  fre- 
quent perhaps  being  the  giving  of  mileage  books ;  so  that  a  state 
legislator  or  city  mayor  or  other  officer,  when  he  uses  it,  may 
appear  to  be  paying  his  passage  though  in  fact  he  is  receiving  it  free. 
I  need  hardly  say  that  the  giving  the  transaction  this  form  does 
not  in  any  degree  relieve  it  of  the  discredit  which  fairly  attaches 
to  it,  or  lessen  in  the  least  its  moral  turpitude :  on  the  contrary,  it 
adds  to  the  main  offence  of  obtaining  transportation  at  the  cost  of 
the  public,  the  cowardice  of  going  through  the  forms  of  payment, 
that  by  this  false  pretence  the  offender  may  cheat  his  fellow-pas- 
sengers into  the  belief  that  he  is  doing  what  a  proper  regard  for 
the  rights  of  others  would  require  him  to  do.  In  some  sections  of 
the  country  the  practice  here  referred  to  has  continued  for  such  a 
length  of  time  that  it  seems  to  be  expected  by  the  general  public 
that,  as  a  matter  of  course,  it  will  be  continued  indefinitely,  and 
it  is  therefore  believed  to  be  practiced  by  every  successive  incum- 
bent of  certain  offices.  Whoever  would  investigate  the  sources  of 
political  corruption  in  such  sections  would  do  well  to  inquire  to 
what  extent  they  had  their  origin  in  public  opinion  being  debauched 
by  these  corrupt  practices  until  at  length  the  grosser  forms  of 
political  misconduct  came  to  be  looked  upon  as  matters  of  course, 
and  tolerated  or  excused  for  that  reason. 

The  manner  m  which  advantage  is  taken  of  the  exceptions  of 
the  statute  in  order  to  avoid  charging  the  regular  rates  also  has  a 
tendency  in  the  direction  of  showing  that  the  regular  rates  are 
higher  than  they  should  be.  Thus  the  statute  in  forbidding  discrimi- 
nations in  passenger  carriage  makes  exceptions  for  the  case  of 
excursions;  and  how  diligent  some  roads  are  in  finding  excuses 
for  excursions  in  which  they  are  to  carry  the  passengers  for  a 
mere  fraction  of  the  customary  rates  is  well  known  to  us  all.  The 
excuse  advanced  may  be  that  thereby  they  create  business  which 
would  not  otherwise  come  to  them  ;  that  they  gain  favor  by  giving 
special  accommodation  to  communities  or  societies  at  particular 
times  and  on  special  occasions,  and  so  on ;  but  we  have  a  right 
to  assume  that  they  nevertheless  expect  to  make  and  do,  as  a  gen- 
eral fact,  make  some  profit  on  every  such  occasion,  except  when 
calamities  befall  them  through  the  accidents  which  are  much  more 
likely  to  attend  special  trains,  running  on  unusual  time,  than  the 
regular  trains.  A  person  investigating  the  subject  with  a  view  to 
reaching  the  underlying  reasons  for  their  action  would  be  very 


THE  RAILWAY  PROBLEM  DEFINED.  15 

likely  to  inquire  why,  instead  of  manifesting^  great  anxiety  to 
increase  the  number  of  occasions  for  exceptional  trains  carrying 
passengers  below  the  regular  rates,  the  company  does  not  make 
the  regular  rates  as  low  as  can  reasonably  be  afforded,  and  thereby 
invite  the  public  to  make  excursions,  not  on  special  occasions 
merely,  but  continuously ;  thus  increasing  the  aggregate  passenger 
traffic  though  taking  it  by  the  ordinary  and  safe  trains,  as  the  rail- 
roads of  some  foreign  countries  have  done  without  loss  by  a  similar 
reduction  of  rates.  The  reason  for  making  this  inquiry  would 
seem  to  be  specially  forcible  when  it  is  borne  in  mind  that  the 
exceptional  trains  that  are  run  at  reduced  rates  furnish  to  a  very 
considerable  extent  the  opportunities  which  the  class  of  people 
known  as  scalpers  embrace  to  make  great  profits  out  of  the  rail- 
road companies,  and,  through  them,  out  of  the  general  public  who, 
in  their  regular  travels,  must  pay  rates  which  are  maintained 
above  what  would  otherwise  be  necessary,  that  those  who  charge 
them  may  not  be  the  losers  through  the  operations  of  this  class  of 
persons. 

But  if  the  railroad  companies  were  chargeable  with  no  breach 
of  law  or  of  sound  morality,  or  with  want  of  good  policy  in  the 
carriage  of  passengers  free,  or  of  either  passengers  or  freight  at 
unjustly  discriminating  rates,  and  if  they  made  use  of  their  privi- 
leges under  the  exceptional  provisions  of  the  statutes  wisely  and 
justly,  there  would  still  be  the  same  railroad  problem  that  exists 
now — not,  it  is  true,  accompanied  by  as  many  evils  as  now,  but 
nevertheless  demanding  solution  as  it  now  demands  it,  only  some- 
what less  importunately. 

Many  other  things  in  railroad  service  are  causes  of  annoyance 
to  the  public,  or  tend  to  break  up  friendly  and  useful  relations  as 
between  the  roads  themselves,  but  they  may  be  passed  over 
lightly  at  this  time  because  they  touch  but  lightly  upon  the  great 
problem  that  confronts  the  public  and  makes  such  serious  demand 
upon  the  best  thought  of  the  country.  Thus  the  refusal  of  one 
road  to  unite  with  another  in  making  convenient  arrangements  for 
the  transfer  of  freight  or  passengers  from  one  line  to  the  other 
without  unneccessary  delay;  or  the  making  of  arrangements  with 
one  company  which  are  unjustly  discriminating  as  against  another, 
are  seen  in  some  cases  to  be  evils  of  no  slight  magnitude;  but 
such  cases  are  not  numerous ;  they  are  believed  to  be  diminishing 
in  number  from  year  to  year ;  and  for  the  most  part  they  can  be 
dealt  with  by  the  public  authorities  on  a  consideration  of  all  the 
facts  with  no  great  difficulty. 

The  troubles  that  are  always  present,  always  annoying,  and 
always  difficult  of  adjustment,  are  those  which  relate  to  the  mak- 
ing of  rate  sheets,  and  to  the  manner  in  which  these  are  observed 
or  treated  after  they  are  made.  It  is  here  that  we  discover  a 
problem  that  is  not  narrow  or  temporary,  and  that  does  not  touch 
lightly  upon  the  relations  between  the  railroads  themselves,  but 


1 6  THE  RAILWAY  PROBLEM  DEFINED. 

is  seen  in  nearly  all  their  controversies  and  misunderstandings, 
and  that  is  the  prolific  parent  of  nearly  all  the  difficulties  between 
the  railroads  and  those  who  have  occasion  tor  their  services.  It 
is  the  unjust  nature  of  the  rate  sheets  when  the  rights  of  the 
public  or  of  other  roads  are  considered;  it  is  the  refusal  to  join 
with  other  roads  in  making  them,  or  the  demand  of  an  unreasonable 
share  of  a  joint  rate  when  one  is  made ;  it  is  the  sudden  reduction 
in  rates  when  injury  can  be  done  to  a  rival  by  resorting  to  that 
measure,  or  when  it  is  hoped  that  the  rival  can  be  compelled 
thereby  to  give  assent  to  some  measure  to  which  assent  cannot  be 
obtained  by  negotiation ;  it  is  the  refusal  to  unite  in  through  bills 
of  lading  at  agreed  rates,  or  to  receive  for  the  transportation  of 
persons  the  tickets  that  have  been  given  by  other  roads ;  it  is  the 
failure  to  abide  by  understandings  concerning  rates  when  a  dis- 
regard of  them  seems  to  promise  a  temporary  advantage;  in 
short,  it  is  the  manner  in  which  this  whole  subject  of  making 
rates  is  dealt  with  and  treated  by  the  railroad  companies,  and 
the  effect  thereby  upon  their  own  interests  respectively,  the 
interests  of  stock  and  bondholders,  and  the  interests  of  those  who, 
willingly  or  unwillingly,  are  their  customers,  that  present  the 
fundamental  and  still  unsolved  problem  which  must  necessarily 
address  itself,  first  of  all  to  the  railroad  managers  of  the  country, 
and  after  that  to  the  public  authorities.  The  evils  in  railroad  ser- 
vice nearly  all  find  there  origin  here ;  and  especially  is  this  true 
of  those  that  are  most  difficult  and  inveterate.  The  railroad 
problem  will  be  dealt  with  effectually  when  the  power  to  fix  the 
rates  for  railroad  transportation  is  placed  upon  such  a  basis  that 
the  evils  now  so  prominent  and  troublesome  and  persistent,  which 
spring  from  its  exercise,  shall  be  cured  and  the  power  itself 
brought  under  effectual  regulation. 

When  the  number  of  railroads  which  are  now  merely  subsidiary 
to  other  and  stronger  lines,  either  through  being  brought  into  the 
same  interest  or  from  being  leased  or  otherwise  effectually  con- 
trolled, are  left  out  of  account,  there  are  something  like  five  hundred 
in  this  country  still  remaining,  whose  boards  have  the  power  to 
make  rates  for  the  carriage  of  passengers  and  property.  These 
boards  are  by  the  law  left  to  exercise  in  the  first  instance  what  is 
practically  a  free  and  unlimited  authority  in  the  making  of  rate 
sheets:  They  may  make  them  low  or  high,  just  or  unreasonably 
discriminating  as  between  persons  and  property,  or  different 
classes  of  property,  or  between  different  centers  of  trade,  at 
pleasure :  the  few  instances  in  which  the  laws  have  undertaken  to 
prescribe  a  precise  limit  being  in  the  main  confined  to  passenger 
transportation.  The  several  boards  are  not  obliged  to  agree  with 
each  other  as  to  what  the  rates  shall  be :  it  may  be  their  policy  to 
come  to  agreement,  and  it  may  be  assum^ed  that  they  will  recog- 
nize this  fact  and  endeavor  to  come  to  some  understanding  in 
advance ;  but  this  is  not  compulsory ;  and  it  not  unfrequently  hap- 


THE  RAILWAY  PROBLEM  DEFINED.  ^      ly 

pens  that  a  single  road  will  proceed  to  make  rates  wholly  irrespec- 
tive of  what  has  been  done  or  proposed  by  other  roads  with  which 
it  must  come  into  competition  or  relations  of  some  sort  in  respect 
to  business.  It  was  at  first  thought  by  those  who  made  the  laws 
for  the  building  and  management  of  roads,  that  to  leave  the 
authority  thus  unrestricted  was  the  best  possible  condition  of 
things :  that  it  would  lead  to  active  competition  in  rates,  of  which 
the  general  public  would  have  the  benefit:  that  the  competition 
would  as  a  matter  of  course  force  the  rates  down  to  a  reasonable 
point :  in  short,  that  the  competition  would  act  precisely  as  it  does 
in  other  lines  of  business.  Experience  has  shown  that  this  idea  of 
railroad  competition  is  a  mistaken  one :  that  it  cannot  be  compared 
with  competition  in  the  channels  of  commerce  in  general:  that 
there  are  no  such  tests  of  the  value  of  railroad  service  as  can  fix 
the  limit  down  to  which  a  road  may  go  without  inevitable  loss  upon 
its  business  as  an  aggregate :  that  it  may  carry  some  classes  of  its 
business  at  impolitic  if  not  in  fact  at  losing  rates  and  yet  make 
profits  upon  its  whole  operations  by  charging  to  other  classes  of 
its  business  rates  which  may  perhaps  seem  to  be  excessive  and  yet 
cannot  clearly  be  shown  to  be  so  because  of  the  absolute  impossi- 
bility of  making  distinct  apportionment  between  the  cost  of  the 
service  rendered  to  one  class  and  that  rendered  to  the  other. 
Indeed,  it  is  now  very  well  known  that  in  many  cases  where  roads 
are  carrying  freights  at  what  seem  to  be  no  more  than  reasonable 
rates,  on  lines  leading  directly  from  one  great  business  center  to 
another,  other  roads  whose  lines  are  of  twice  the  distance  in 
length,  may  be  carrying  the  like  freights  at  the  same  or  at  even 
less  rates,  though  the  expense  to 'them  is  presumably  twice  as 
great.  This  they  do  because  they  are  forced  to  do  so  by  a  situa- 
tion which  they  find  absolutely  controlling.  The  general  fact  is 
that  in  severe  competition  between  business  centers,  the  very  long 
route  carries,  not  at  the  same  rate  merely,  but  at  a  lower  rate 
because  otherwise  it  would  not  get  the  business  to  carry.  How 
distinctly  it  is  seen  here  that  it  is  utterly  impossible  to  judge  of 
railroad  competition  and  its  effects,  its  usefulness  and  its  mischiefs, 
by  comparing  it  with  competition  as  we  encounter  it  in  other  lines 
of  business. 

We  have  said  that  every  one  of  these  five  hundred  operating 
roads,  through  its  managing  officers,  may  make  rate  sheets  at 
pleasure.  The  rates  are  subject  to  be  changed  to  some  extent 
afterwards  when  they  are  found  to  be  violative  of  public  rights 
or  interests,  but  the  public  authorities  are  not  consulted  and  their 
consent  is  not  asked  as  a  prerequisite  to  putting  the  rate  sheets  in 
force.  If  a  rate  sheet  affected  only  the  road  itself  and  its  customers, 
the  fact  stated  would  in  a  great  many  cases  be  of  local  importance 
only,  and  other  roads  not  directly  competing  with  the  road  making 
it  need  not  concern  themselves  specially  with  its  being  put  in 
force.     But  so  inextricably  are  the  railroads  of  the  country  inter- 


1 8  THE  RAILWAY  PROBLEM  DEFINED. 

mingled  in  interest ;  in  so  many  ways  do  they  form  routes  from 
business  center  to  business  center ;  from  the  lakes  to  the  gulf  and 
from  ocean  to  ocean ;  so  easy  is  it  for  almost  any  seemingly  unim- 
portant road  to  be  made  a  part  of  some  direct  or  indirect  route 
which  shall  constitute  a  great  channel  of  commerce,  that  any  con- 
siderable change  in  the  rate  sheets  by  any  one  of  these  five  hundred 
boards  is  not  only  likely  to  affect  the  business  and  the  rate  sheets 
of  the  roads  which  are  its  immediate  rivals,  but  to  reach  out  also 
in  its  influence  from  road  to  road  in  all  directions ;  not  over  small 
neighborhoods,  but  from  state  to  state,  until  what  seemed  to  be 
the  action,  and  was  perhaps  the  hasty  and  reckless  action,  of  a 
mere  local  board  may  become  almost  of  continental  importance. 
An  ill-advised  act  possibly  resulting  from  passion  or  from  a  belief 
that  a  power  to  do  mischief  when  thus  exercised  will  compel  others 
to  do  what  they  would  not  otherwise  consent  to,  by  way  of  pur- 
chasing peace,  may  thus  carry  disorder  into  the  railroad  system  of 
a  large  section  of  the  country  if  not  into  the  whole  of  it,  and  may 
compel  a  change  in  the  rate  sheets  of  all  the  roads  which  form  the 
lines  competing  with  those  of  which  the  road  whose  rate  sheet 
causes  the  disorder  is  or  can  be  made  to  become  a  constituent  part. 
Now  it  need  hardly  be  said  in  this  convention  that  one  of  the 
most  important  things  to  be  accomplished  in  the  regulation  of 
railroads  is  to  secure  steadiness  of  rates :  I  do  not  mean  that  sort 
of  steadiness  that  would  prevent  the  gradual  reduction  of  railroad 
charges  as  it  should  be  seen  to  be  practicable  and  just  for  the  rail- 
roads to  make  it ;  but  I  mean  the  sort  of  steadiness  that  makes 
changes  only  in  the  proper  direction,  and  when  it  does  make 
them,  does  so  deliberately,  carefully,  after  consideration  of  all 
the  interests  involved,  and  after  such  reasonable  notice  to  the 
public  as  well  as  to  the  railroad  interests,  as  will  enable  due  pro- 
vision to  be  made  by  others  to  prevent  heedless  loss  and  injury 
therefrom.  All  sudden  changes  are  necessarily  to  some  extent 
injurious :  they  are  injurious  even  though  they  are  made  in  the 
direction  of  lower  rates  and  when  as  a  matter  of  right  they  ought 
to  be  made  in  that  direction :  for  they  force  sudden  changes  also 
in  the  values  of  property ;  they  affect  in  unexpected  ways  contracts 
made  in  the  commercial  world ;  and  they  give  abundant  oppor- 
tunities for  fraudulent  understanding  as  between  railroad  officials 
and  large  dealers :  opportunities  which  the  public  are  certain  to 
suspect  are  not  unfrequently  availed  of.  The  law  does  well  when 
it  requires  that  a  notice  reasonable  in  point  of  time  shall  be  given 
not  merely  of  advances  in  rates  but  of  reductions  also.  This  is 
right  and  proper  even  when  the  reductions  result  from  competition 
properly  so  called  in  railroad  service ;  but  the  sudden  cutting  of 
rates  is  usually  an  act  which  can  by  no  proper  use  of  terms  be 
called  a  result  of  legitimate  competition.  Almost  invariably  it  is 
an  act  of  open  and  avowed  warfare,  entered  upon  not  to  benefit 
the  public,  but  to  injure  a  rival  line.     It  differs  from  the  warfare 


THE  RAILWAY  PROBLEM  DEFINED.  ig 

between  nations  in  this,  that  in  the  case  of  international  war  the 
effects  can  commonly  be  limited  for  the  most  part  to  those  who 
engage  in  it,  while  the  rate  war  on  the  other  hand  injures  not 
merely  the  parties  engaged  but  possibly  to  an  equal  extent  other 
railroads  whose  operations  reach  the  same  sections,  while  injuring 
also  far  more  than  it  benefits,  the  business  community  that  seeks 
to  take  advantage  of  it. 

This,  then,  is  the  "railroad  problem:"  there  are  mischiefs  in 
railroad  service  that  are  outside  of  it,  but  we  distinctly  indicate 
the  main  source  of  difficulty  when  we  place  our  finger  upon  the 
power  as  it  exists  now,  to  make  and  unmake  the  rates  for  passen- 
ger and  freight  transportation.  So  long  as  five  hundred  bodies 
of  men  in  the  country  are  at  liberty  to  make  rate  sheets  at 
pleasure,  and  to  unmake  or  cut  and  recut  them  in  every  direc- 
tion at  their  own  unlimited  discretion  or  want  of  discretion,  and 
with  little  restraint  on  the  part  of  the  law  except  as  it  imposes  a 
few  days'  delay  in  putting  changes  in  force,  the  problem  will 
remain  to  trouble  us;  the  mere  existence  of  the  power  making 
losses,  disorder,  and  confusion  constantly  imminent.  The  authority 
to  reduce  rates  when  they  are  found  to  be  excessive  is  but  a  slight 
corrective,  and  reaches  the  evils  only  on  the  public  side ;  and  I 
need  hardly  remind  you  who  understand  it  so  well,  that  in  this 
matter  of  rates,  the  power  on  the  part  of  the  public  authorities  to 
compel  the  railroads  to  do  what  is  just  to  each  other  in  respect  to 
observing  rates  which  they  have  once  made,  and  to  adhering  to 
rate  sheets  until  there  is  reasonable  ground  for  changing  them,  is 
so  very  slight  that  it  may  really  be  regarded  as  too  insignificant 
to  be  spoken  of  as  possessing  substantial  value. 

A  problem  so  momentous  as  that  described,  the  members  of 
this  convention  may  very  well  decline  to  discuss  in  its  totality,  or 
even  at  all,  except  as  by  law  they  may  have  been  given  authority 
to  deal  with  minor  questions  embraced  within  it ;  but  this  need 
not  hinder  a  recognition  of  its  difficulties  nor  of  the  infinite  powers 
of  mischief  which  are  involved.  The  first  effective  step  towards 
the  removal  of  any  great  public  evil  is  to  have  distinctly  pointed 
out  its  scope  and  its  proportions,  that  those  who  undertake  a  reform 
may  not  be  misled  into  accepting  some  single  feature  as  constitut- 
ing the  whole,  or  some  minor  consequence  as  embracing  the  ag- 
gregate of  all  the  mischiefs  which  do  or  may  result  from  it. 

In  the  preparation  of  this  paper,  the  purpose  to  limit  it  strictly 
to  indicating  what  the  railroad  problem  is,  has  been  closely 
adhered  to,  and  no  attempt  whatever  has  been  made  to  indicate 
what  should  be  the  solution. 


THE   RAILROAD  MALADY  AND  ITS 
TREATA\ENT. 

By  Hon.  Augustus  Schoonmaker. 

So  much  has  been  said  and  written  about  the  misconduct  and 
the  troubles  of  railroads  that  the  general  public  is  familiar  with 
the  oft  repeated  tale.  Railroads  complain  that  their  revenues  are 
insufficient,  that  the  properties  are  unprofitable,  that  rates  are 
constantly  demoralized  and  declining,  and  that  government  regu- 
lation is  a  hindrance  to  their  prosperity.  The  public  complains 
that  railroad  management  is  dishonest,  that  unjust  discriminations 
and  stealthy  trickery  are  practiced,  that  equality  and  justice  are 
disregarded,  and  business  rendered  precarious  by  the  instability 
of  transportation  charges  and  its  effect  on  commercial  values. 
The  public  often  ascribes  these  conditions  to  the  depravity  of  rail- 
road officials  and  agents,  and  their  consequent  disregard  of  busi- 
ness morality  and  fair  dealing.  Railroad  managers  protest  that 
their  methods  and  practices  are  forced  upon  them  by  conditions 
surrounding  them  beyond  their  control,  compelHng  a  struggle 
for  existence ;  that  it  is  their  duty  to  protect  and  sustain  the  prop- 
erties they  manage,  and  that  the  multitude  of  railways  and  the 
competition  between  them  lead  to  the  troubles  and  evils  whose 
recitals  weary  the  public  ear. 

There  is  enough  truth  in  what  is  charged  by  the  public  and  what 
is  said  by  the  roads  in  exculpation  of  themselves,  to  give  reason- 
able foundation  for  the  accusations  and  extenuating  pleas.  But 
half  truths  are  of  little  value,  and  the  whole  truth  is  essential  to 
furnish  the  real  explanations  of  the  conditions  admitted  to  exist. 

One  has  not  far  to  go  to  find  the  active  and  potent  cause  of  the 
contentions  and  practices  that  hurt  the  railways,  and  the  unjust 
discriminations  and  irregularities  that  prejudice  the  public.  Mul- 
tiplication of  roads  and  competition  are  not  the  primary  causes. 
They  are  secondary  or  resulting  causes,  and  aggravate  the  dis- 
ordered condition ;  but  the  efficient  cause  lies  back  of  them.  It  is 
none  other  than  the  independent  power  of  every  railroad  or  con- 
solidated system  of  roads  to  establish  and  change  rates  at  will, 
with  no  control  or  restriction  except  the  trifling  provision  of  law 
requiring  ten  days'  notice  of  advance  and  three  days'  notice  of 
reduction.     This  power  is  the  Pandora's  box  out  of  which  proceeds 

Reprinted  by  permission  from  the  Railway  Review  of  August  15,  1891. 


THE  RAILROAD  MALADY.  21 

the  whole  scandalous  horde  of  evils — premature  and  speculative 
construction  of  roads,  reckless  competition  in  prices  for  business, 
evasions  of  the  law,  shrinking  revenues,  the  various  forms  of  un- 
just discrimination,  rebates  and  devices  for  getting  business  from 
competitors.  And  this  pernicious  power  is  the  creation  of  law, 
and  is  protected  by  law,  upon  the  antiquated  and  once  respectable 
theory,  but  now  fully  demonstrated  fallacy,  that  unrestricted  com- 
petition among  railroads  is  a  public  benefit,  that  the  public  interest 
is  subserved  in  getting  its  transportation  service  for  the  lowest 
prices  at  which  it  may  be  publicly  or  privately  offered  for  sale, 
and  that  any  restraints  on  competition  would  tend  to  raise  or  keep 
prices  high,  and  therefore  prejudice  the  public.  The  law  protects 
this  power  by  its  omission  to  control  or  regulate  it,  and  by  pro- 
hibiting under  high  penalties  any  efficient  efforts  to  regulate  it  on 
the  part  of  the  roads.  The  power,  therefore,  is  the  favorite  of 
the  law,  as  the  instrument  by  which  competition  is  to  be  pre- 
served and  low  rates  secured.  The  competition  so  sedulously 
guarded  by  law  is  solely  in  rates.  Competition  in  other  respects, 
such  as  facilities,  quality  of  service,  accommodations  for  the  public, 
have  been  left  to  shift  for  themselves. 

What  is  this  power?  In  the  shortest  phrase,  it  is  a  power  to  do 
infinite  mischief — a  power  by  every  road  to  do  as  it  pleases ;  to 
separate  from  the  general  railroad  system  of  the  country,  which 
to  the  eye  of  the  government,  as  an  agent  of  government,  and  in 
its  relations  to  the  public,  is  essentially  a  unit;  to  unsettle  rates; 
to  bring  on  railroad  wars ;  to  diminish  revenues ;  to  disturb  values 
and  demoralize  trade  and  commerce:  to  induce  unjust  discrimi- 
nations, with  their  train  of  attendant  evils. 

Is  evidence  needed  in  support  of  these  facts?  One  has  only, 
for  confirmation,  to  turn  his  ear  to  the  complaints  that  come  up 
from  all  parts  of  the  country,  voiced  by  railway  associations,  and 
daily  rehearsed  in  the  public  press,  that  rates  can  not  be  main- 
tained, that  agreed  schedules  have  been  wantonly  changed  or  vio- 
lated, that  some  competitor,  like  a  Canadian  line,  or  a  circuitous 
water  and  rail  rival  of  the  trunk  lines,  or  a  superfluous  line  be- 
tween Chicago  and  St.  Paul,  or  between  Chicago  and  the  Missouri 
river,  is  cutting  rates,  that  business  is  being  diverted  and  revenues 
falling  off;  or,  for  additional  evidence,  to  open  his  eyes  to  the 
scores  of  traffic  associations  supported  at  great  expense  for  the 
sole  purpose  of  regulating  competition  by  agreements  for  fixing 
and  maintaining  competitive  rates.  The  roads  endeavor  to  do  by 
voluntary  action  what  the  government  has  failed  to  do  for  them, 
and  90  per  cent,  of  their  efforts  is  wasted,  because  the  govern- 
ment withholds  its  sanction. 

Mr.  Stickney,  whose  experience  and  knowledge  as  a  practical 
railroad  man  qualify  him  to  speak  with  authority,  in  his  recent 
vigorous  and  very  frank  book  on  the  railway  problem,  furnishes, 
under  cover  of  a  discussion  of  various  topics,  an  instructive  com- 


22  THE  ^AJLROAD  J^ALA^Y. 

mentary  on  the  dangerous  power  of  independent  rate  making. 
At  pages  6  and  7  he  says :  ' '  This  unrestricted  power  to  discrimi- 
nate in  the  matter  of  rates,  lodged  in  the  hands  of  one  man,  the 
manager,  say,  of  five  thousand  miles  of  railway;  the  power, 
through  malice,  ignorance  or  stupidity,  to  decree  which  out  of  a 
thousand  cities  and  villages  located  on  his  lines  should  prosper, 
and  which  should  not,  which  individuals  out  of,  say,  ten  thousand 
merchants  doing  business  in  those  cities  and  villages  should  make 
a  profit  or  a  loss,  *  *  *  such  enormous  power  over  the 
fortunes  of  so  many  should  never  be  lodged  in  the  hands  of  any 
human  being." 

At  page  31,  after  illustrating  the  effect  of  slight  concessions  in 
rates,  he  says;  "With  these  facts  fresh  in  mind,  who  is  willing  to 
say  that  the  power  to  discriminate  in  freight  rates  ought  to  be 
lodged  in  the  control  of  one  man  or  a  few  men  ?  Under  such  con- 
ditions what  business  is  safe  ?  " 

And  in  commenting  on  the  report  of  the  senate  committee,  he 
says,  at  page  146 :  "  The  whole  discussion  by  the  committee  tended 
towards  one  conclusion — that  the  traffic  on  railways  should  be 
regulated  by  law,  in  the  interest  of  the  carrier  as  well  as  of  the 
people,  since  every  evil  which  was  pointed  out  by  the  committee 
grew  out  of  the  schedule  of  rates.  With  a  properly  arranged  and 
enforced  schedule,  none  of  these  evils  would  be  possible."  And 
once  more  (page  153):  "The  railway  companies  and  the  public 
both  suffer  from  the  confusion  in  rates ;  since  when  the  rates  in 
the  various  schedules  conflict,  the  lowest  prevails,  which  results  in 
loss  of  revenue  to  the  companies  and  in  unjust  discrimination  to 
the  public." 

Judge  Cooley,  whose  competence  to  speak  will  not  be  questioned, 
in  his  able  address  at  the  convention  of  railroad  commissioners  at 
Washington  in  March  last,  says:  "The  troubles  that  are  always 
present,  always  annoying,  and  always  difficult  of  adjustment,  are 
those  which  relate  to  the  making  of  rate  sheets,  and  to  the  man- 
ner in  which  these  are  observed  or  treated  after  they  are  made. 
It  is  here  that  we  discover  a  problem  that  is  not  narrow  or  tem- 
porary, and  that  does  not  touch  lightly  upon  the  relations  between 
the  railroads  themselves,  but  is  seen  in  nearlv  all  their  controver- 
sies and  misunderstandings,  and  that  is  the  prolific  parent  of 
nearly  all  the  difficulties  between  the  railroads  and  those  who  have 
occasion  for  their  services." 

Then,  after  discussing  the  independent  power  of  the  different 
roads  to  make  and  change  rates,  and  the  manner  in  which  the 
power  is  exercised,  he  continues  "This,  then,  is  the  railroad 
problem ;  there  are  mischiefs  in  railroad  circles  that  are  outside  of 
it,  but  we  distinctly  indicate  the  main  source  of  difficulty  when 
we  place  our  finger  upon  the  power  as  it  exists  now  to  make  and 
unmake  rates  for  passenger  and  freight  transportation.  So  long 
as  500  bodies  of  men  in  the  country  are  at  liberty  to  make  rate 


THE  RAILROAD  MALADY.  23 

sheets  at  pleasure,  and  to  unmake  and  cut  and  recut  them  in  every 
direction  at  their  own  unlimited  discretion,  or  want  of  discretion, 
and  with  little  restraint  on  the  part  of  the  law  except  as  it  imposes 
a  few  days  delay  in  putting  changes  in  force,  the  problem  will  re- 
main to  trouble  us;  the  mere  existence  of  the  power  making 
losses,  disorder  and  confusion  constantly  imminent." 

It  may  seem  superflous  to  refer  to  evidence  or  to  quote  authori- 
ties in  support  of  a  proposition  that  should  be  evident  in  the 
nature  of  things,  and  be  matter  of  general  knowledge.  But  there 
are  many  who  do  not  understand  it,  and  least  of  all,  unfortunately, 
the  majority  of  those  who  are  charged  with  the  responsibility  of 
making  laws.  This  is  proven  conclusively  by  the  character  of  the 
laws  framed.  Unjust  discrimination  was  found  to  be  the  crown- 
ing sin  of  railroads,  and  the  evil  intended  to  be  cured.  This  was 
done  by  enacting  into  a  statute  a  few  sound  ethical  principles, 
long  recognized  as  legal  rules,  and  declaring  that  their  violation 
should  be  unjust  discrimination,  to  be  punished  with  fire  and 
sword,  while  the  cause  of  all  the  wrongs  intended  to  be  corrected 
was  left  mitouched  and  active.  It  was  like  enacting  that '  'honesty 
is  the  best  policy,"  or  like  a  father  giving  excellent  advice  to  his 
son  and  then  filling  his  pockets  with  money  and  sending  him  forth 
to  spend  it  in  dissipation.  Stickney  says  of  the  law :  "It  at- 
tempted to  destroy  discrimination,  while  preserving  the  cause  of 
discrimination — competition,  so  called."     Page  140. 

As  long  ago  as  1885  Judge  Cooley,  in  a  letter  to  the  Cullom 
committee,  with  a  prescience  evincing  his  thorough  comprehension 
of  the  subject,  wrote :  "There  is  a  demand  for  legislation  that  will 
secure  at  the  same  time  steadiness  of  rates  and  unrestrained  and 
even  active  competition,  things  which  necessarily  kill  each  other; 
and  those  who  make  the  demand,  if  compelled  to  choose  between 
the  two,  would  be  almost  certain,  in  the  present  state  of  public 
opinion,  to  choose  that  which  was  least  beneficial. "  *  *  "^  "But 
it  is  thought  by  many  that  a  complete  remedy  could  be  found  in 
legislation  that  should  require  rates  to  be  made  public,  and  ad- 
hered to  for  a  definite  time  without  change,  under  penalty,  and 
that  should  at  the  same  time  prohibit  the  common  imderstandings 
that  the  railroads  have  endeavored  to  harmonize  upon.  The  pro- 
hibition would  necessarily  destroy  the  remedy;  that  is  to  say,  the 
attempt  at  such  a  remedy  would  be  more  mischievous  than  bene- 
ficial, unless  it  had  for  its  basis  a  general  predetermination  of  rates. 
Such  most  certainly  would  be  the  case  as  to  all  the  business  in  re- 
spect to  which  rates  are  now  so  unsteady  as  to  make  legislation 
important ;  that,  namely,  in  respect  to  which  there  is  competition, 
which  of  course  is  the  major  part  of  all." 

How  completely  these  predictions  have  been  verified  it  is  un- 
necessary to  spend  time  in  pointing  out.  It  is  enough  to  say  that 
the  mischiefs  intended  to  be  cured  by  the  law  was  framed  on  the 
theory  indicated,  have  increased  and  multiplied,  and  the  law  itself 
has  fallen  largely  into  disrespect. 


24  THE  RAILROAD  MALADY. 

The  preservation  of  free  and  active  competition  has  been  the 
favorite  theory  iipon  which  all  laws  for  the  regulation  of  railways 
have  hitherto  been  framed.  No  doubt  the  idea  had  its  origin  in 
the  natural  dread  of  combination  and  extortion.  Competition  has 
therefore  been  the  ignis  fatutts  that  has  allured  theoretical  writers 
and  led  astray  lawmakers.  But  experience,  which  is  the  test  of 
all  human  plans,  has  demonstrated  the  fallacy  of  the  theory.  It 
is  a  fact  now  as  well  known  as  any  fact  of  human  experience  that 
free  and  active  competition  is  inconsistent  with  regulation,  that, 
in  the  language  of  Judge  Cooley,  it  kills  the  remedy.  So  long  as 
the  power  to  compete  in  prices  for  service  exists  and  is  authorized 
by  law,  and  the  demand  for  business  is  greater  than  the  supply,  it 
will  be  exercised  to  the  extent  and  in  the  manner  deemed  neces- 
sary. The  scramble  of  a  flock  of  chickens  for  a  few  grains  of  corn 
scattered  on  the  ground  is  only  an  illustration  of  the  competition 
of  railroads  for  business. 

Is  there  any  plan  that  affords  promise  as  a  practicable  and  effi- 
cient remedy?  Any  untried  theory  must  rest  largely  in  opinion 
until  tested  by  experience.  Obviously,  regulation,  to  be  of  value, 
must  regulate  the  whole  subject  to  which  it  is  applied.  The  cause 
that  produces  mischievous  results  must  be  reached  or  there  can 
be  no  effective  regulation.  Regulation  is  as  essential  to  the  rail- 
ways as  to  the  public.  This  is  abundantly  shown  by  their  own 
well  meant  but  ineffectual  attempts  at  voluntary  regulation. 
From  the  side  of  the  public,  stability  and  uniformity  of  reasonable 
rates,  with  exclusion  of  undue  preferences  and  unjust  discrimi- 
nations, are  the  things  of  importance,  and  they  are  no  less  impor- 
tant to  the  railroads.  In  these  respects  the  interests  of  the  public 
and  the  roads  are  mutual.  In  depriving  the  roads  of  the  power 
to  hurt  each  other,  they  will  be  divested  of  the  power  to  injure 
the  public.  On  the  part  of  the  railroads,  what  is  most  needed  is 
that  a  single  road,  and  one  perhaps  of  least  importance  and  use- 
fulness, shall  not  have  the  power  to  demoralize  the  business  of 
competitors  and  drive  them  to  bad  practices  and  financial  disaster. 

Where  the  whole  subject  of  the  remedy  to  be  applied  that  shall 
be  potential  and  free  from  vital  objections  is  theoretical,  there 
must  be  various  theories  and  honest  differences  of  opinion.  The 
accepted  governmental  theory  is  regulation  of  the  conduct  of  rail- 
ways in  transportation  only,  without  interfering  with  active  com- 
petition between  roads  and  their  independent  power  of  rate  mak- 
ing, which  is  the  motor  of  competition.  The  conviction  has  become 
general  that  this  mode  is  inadequate  and  that  something  else  is 
necessary. 

A  theory  that  has  apparently  a  large  body  of  adherents  is  gov- 
ernment ownership  and  operation  of  the  railways  This  is  the 
most  objectionable  of  all.  It  involves  the  purchase  of  eight  to  ten 
billions,  nominal  value,  of  railway  property;  the  maintenance  and 
operation  of  some  170,000  miles  of  railway  with  its  equipment, 


THE  RAILROAD  MALADY.  25 

and  with  the  control,  management  and  payment  of  some  800,000 
employes  necessary  to  its  operation;  and  the  making,  printing 
and  publishing  of  all  the  classifications  and  tariffs  for  the  enormous 
amount  of  traffic  carried — upwards  of  half  a  billion  tons  of  freight 
annually — and  nearly  half  a  billion  passengers. 

In  the  single  matter  of  the  relations  to  employes  with  the  ever 
impending  and  embarrassing  questions  they  involve,  new  and 
serious  problems  would  certainly  arise.  And  what  additional  ele- 
ments of  public  peril  and  demagogic  disturbance  these  relations 
would  afford. 

It  also  involves  the  wielding  of  a  tremendous  political  power, 
with  the  complications  and  abuses  inevitable  to  its  exercise.  The 
management  of  the  post-office  department  is  insignificant  in  com- 
parison. These  objections  are  insuperable.  Whatever  a  de- 
spotic government  like  Russia  may  find  practicable  in  this  regard, 
in  a  republic  like  ours  it  cannot  be  done.  The  attempt  to  assume 
this  gigantic  undertaking  would  speedily  shatter  the  government 
to  fragments. 

Another  theory  proposed  is  that  the  roads  should  remain  in  pri- 
vate hands  for  purposes  of  ownership  and  operation,  as  at  present, 
but  that  the  government  should  establish  and  change  whenever 
necessary  the  schedules  of  rates,  and  exercise  summary  powers 
for  their  enforcement.  This  is  the  argument  of  Mr.  Stickney's 
book,  and  the  conclusion  to  which  the  whole  discussion  apparently 
is  directed.  This  plan,  which  has  its  germ  in  the  English  system 
in  the  powers  of  the  board  of  trade,  and  is  possible  under  the  con- 
ditions and  with  the  limited  scale  of  railways  of  that  country  is, 
to  those  who  believe  in  the  infallibility  and  omnipotence  of  gov- 
ernment, plausible  theoretically,  but,  under  the  railway  and  gov- 
.ernmental  conditions  of  this  country,  is  open  to  grave  objections. 

Those  are,  briefly,  the  nature  and  magnitude  of  the  work,  with 
its  endless  complications  and  intricacies,  and  the  impossibility  of 
its  being  done  directly  by  Congress  or  by  any  commission  method 
at  all  likely  to  be  created;  the  political  aniimis  inseparable  from 
nearly  everything  done  through  government  agencies  which  are 
liable  to  frequent  changes  for  partisan  reasons ;  the  repugnancy 
of  the  plan  to  the  spirit  of  our  institutions,  and  the  America^i  idea 
that  a  citizen  should  have  at  least  apart  in  the  management  of 
his  own  business  affairs,  and  non-interference  by  government  be- 
yond certain  necessary  safeguards  required  by  the  general  public 
interests. 

A  unique  theory  emanates  from  an  exalted  source  while  this 
paper  is  in  preparation.  A  member  of  the  supreme  court  of  the 
United  States  in  a  grave  judicial  opinion  suggests  that  the  "powers 
of  a  court  of  equity  may  yet  be  found  adequate  to  the  situation— 
that  such  courts  may  yet  lay  strong  hands  upon  these  railroad  cor- 
porations, and  by  compelling  performance  of  contracts  secure 
stability,  uniformity  and  justice  to  all,  and  thus  quiet  the  clamor 


26  THE  RAILROAD  MALADY. 

and  ay  old  any  necessity  of  governmental  possession  and  manage- 
ment. "  He  declares  that  "  the  powers  and  processes  of  a  court  of 
.equity  are  equal  to  any  and  every  emergency.  They  are  potent 
to  protect  the  humblest  individual  from  the  oppression  of  the 
mightiest  corporation,  to  protect  every  corporation  from  the  de- 
stroying greed  of  the  public ;  to  stop  state  or  nation  from  spolia- 
tion or  destroying  private  rights ;  to  grasp  with  strong  hand  every 
corporation  and  compel  it  to  perform  its  contracts  of  every  nature 
and  do  justice  to  every  individual." 

As  an  illustration  he  says  that  a  judge  **on  the  bench"  of  a  cer- 
tain court  "not  only  took  possession  of  and  managed  great  railroad 
corporations  by  receivers ;  but  built  hundreds  of  miles  of  railroads 
and  created  millions  of  dollars  of  obligations  against  those  roads." 

This  language  is  strong  and  significant  and  implies  more  perhaps 
than  is  expressed.  ^ 

If  the  court  be  the  iinperirun  in  imperio  it  is  declared  to  be,  most 
of  our  governmental  machinery  is  surperfluous. 

Within  judicial  limits  the  enforcement  of  lawful  contracts  is 
sound  doctrine.  But  contracts  of  every  nature  are  not  and  ought 
not  to  be  always  enforced.  ''Circumstances  alter  cases."  When 
statute  law  shall  have  declared  what  contracts  railroad  companies 
may  enter  into  "to  secure  stability,  uniformity  and  justice,"  such 
contracts  should  very  properly  be  enforced.  The  phrase  '  'powers 
of  a  court  of  equity"  is  misty  and  undefinable.  Practically,  it  is 
whatever  a  court  in  a  particular  case  may  see  fit  to  do.  "  Grasp- 
ing," "building"  and  managing  railroads,  if  they  are  functions  of 
a  court,  imply  the  absorption  by  the  judiciary  of  the  powers  of  the 
legislative  and  executive  departments  of  the  government,  and  the 
exercise  of  all  the  powers  lodged  in  its  different  departments,  by 
one  man  sitting  as  a  court  of  equity  and  determining  the  extent 
of  his  own  jurisdiction. 

Applied  in  this  manner  the  theory  means  independence  of  all 
law  and  of  all  interference  by  any  public  authority.  The  judge 
who  sways  the  limitless  powers  of  a  court  of  equity  is  monarch  of 
all  he  surveys.  His  receivers  come  to  him  with  ex  parte  applica- 
tions for  "  instructions  "  and  for  authority  to  do  various  things, 
and  the  judge,  without  the  benefit  of  discussion,  and  drawing 
from  his  own  wells  of  wisdom  only,  issues  his  edicts.  Within 
their  ordinary  jurisdiction  of  deciding  controversies  between 
parties,  and  enforcing  judgments  rendered,  these  courts  are  indis- 
pensable and  invaluable,  but  for  purposes  of  regulating  and  operat- 
ing railroads  they  have  not  in  all  cases  been  a  shining  success. 
The  experience  of  numerous  roads  managed  by  courts  through  re- 
ceivers has  not  been  such  as  to  commend  that  plan  to  public  ap- 
proval. 

The  late  Justice  Miller,  in  a  dissenting  opinion  (104  U.  S.  137), 
in  speaking  of  receivers  of  railroads,  said :  ' '  The  appointment  of 
receivers,  as  well  as  the  power  conferred  on  them,  and  the  dura- 


THE  RAILROAD  MALADY. 


«7 


tion  of  their  office,  has  made  a  progress  which,  since  it  is  wholly 
the  work  of  courts  of  chancery  and  not  of  legislatures,  may  well 
suggest  a  pause  for  consideration.  He  (the  receiver)  generally 
takes  the  property  out  of  the  hands  of  its  owner,  operates  the  road 
in  his  own  way,  with  an  occasional  suggestion  from  the  court, 
which  he  recognizes  as  a  sort  of  partner  in  the  business ;  some- 
times, though  very  rarely,  pays  some  money  on  the  debts  of  the 
corporation,  but  quite  as  often  adds  to  them,  and  injures  prior 
creditors  by  creating  a  new  and  superior  lien  on  the  property 
pledged  to  them." 

Another,  and  so  far  as  can  be  judged  without  previous  trial,  a 
preferable  theory,  is  to  combine  the  authority  of  the  government 
with  the  exercise  of  responsible  power  by  the  roads  themselves 
acting  by  some  joint  or  federated  method  instead  of  every  road 
acting  independently.  Federation  for  common  purposes  and  to 
promote  the  common  good,  is  a  plan  approved  by  the  experience 
of  mankind  for  centuries.  It  is  especially  the  mode  among  races 
endowed  like  the  Anglo-Saxon  with  a  genius  for  government  by 
lawful  and  peaceful  means,  and  is  illustrated  in  its  grandest  form 
in  the  structure  of  our  national  government.  Federation  among 
railroads,  which  are  creatures  and  agents  of  governments,  should 
be  compulsory.  This  theory  requires  the  withdrawal  or  surren- 
der of  the  separate  power  of  every  road  to  make  and  change  rates 
at  its  own  pleasure,  and  substitutes  for  it  a  sort  of  parliament  of 
roads  to  fix  schedules  of  common  rates  by  agreement,  which  shall 
be  binding  on  all  and  be  enforceable  in  a  summary  manner  by  au- 
thority of  the  government.  The  fact  that  nearly  all  rates  are  in- 
terdependent or  related  as  between  competing  lines,  as  well  as 
regards  localities  and  individuals  served  by  a  particular  line,  is  a 
controlling  reason  for  authoritative  federated  action,  as  well  to 
preserve  peace  as  to  promote  common  prosperity.  It  is  implied 
that  in  instances  in  which  agreements  can  not  be  arrived  at,  the 
government,  by  some  office  or  tribunal,  shall  act  as  arbiter  to  de- 
cide the  points  of  difference.  Of  course  it  is  also  implied  that  the 
reasonableness  of  all  rates  and  their  freedom  from  unjust  discrimi- 
nation and  undue  preference  shall  be  subject  to  review  and  correc- 
tion by  the  government,  through  some  appropriate  tribunal  pos- 
sessing judicial  powers  and  capable  of  prompt  action — constituted 
perhaps  on  the  general  pattern  of  the  present  commission,  with 
suitable  modifications,  but  with  a  sufficient  number  of  auxiliary 
commissioners,  to  be  territorially  distributed,  who  should  act  as 
arbiters  in  the  rate-making  federations,  conduct  ex  parte  investi- 
gations, and  have  charge  of  prosecutions  for  violations  of  the  law 
in  their  respective  districts.  And  the  decisions  of  the  tribunal  of 
commerce  should  be  final  in  all  cases,  unless  appealed  from  within 
a  limited  time,  upon  the  record  in  the  case,  to  the  appellate  courts 
of  the  United  States. 

As  a  subsidary  matter  arrangements  for  the  distribution  or  equal- 


28  THE  RAILROAD  MALADY.  • 

izing  of  transportation  among  roads  legitimately  entitled  to  partici- 
pate could  be  anthorized  as  part  of  the  general  scheme  ahd  become 
an  important  factor  in  controlling  the  forces  of  discord  and  pre- 
serving harmony. 

This  theory  assigns  to  government  its  true  function  in  the  busi- 
ness pursuits  of  its  citizens,  as  the  great  reserve  force  to  secure 
justice  and  impartiality,  leaving  to  those  interested  in  the  business 
scope  for  judgment,  and  to  enterprise  and  capacity,  freedom  of 
action,  within  limitations  that  shall  guard  the  public  against  impo- 
sition and  wrong- doing. 

With  the  independent  power  of  rate  making  extinguished  the 
means  of  reckless  competition  ceases,  and  it  would  seem  that  sta- 
bility and  uniformity  of  reasonable  rates  might  be  maintained. 

It  is  not  to  be  expected  that  any  plan  can  be  free  from  objec- 
tion, or  prove  an  absolutely  perfect  remedy.  In  the  affairs  of  the 
world,  and  with  the  constant  friction  of  the  separate  and  often 
opposing  intei*ests,  only  an  approximation  to  ideal  results  is  pos- 
sible. 

The  power  of  congress  to  require  interstate  rates  to  be  estab- 
lished by  federations  of  railways — which  would  be  little  more  than 
an  enlargement  of  existing  associations,  and  legalization  of  their 
acts  in  establishing  schedules — would  seem  to  be  as  clear  as  the 
powers  already  exercised.  The  power  to  regulate  commerce,  as 
defined  and  amplified  by  the  courts,  is  co-extensive  with  the  sub- 
ject to  which  it  relates,  and  embraces  not  only  the  traffic  carried, 
but  the  means  and  instrumentalities  of  carriage,  and  the  terms 
and  conditions  of  carriage,  together  with  the  business  conduct  of 
the  carriers  in  their  relations  to  the  public.  And  it  is  not  to  be 
assumed  that  the  limit  of  the  power  has  yet  been  reached. 

The  powers  of  railway  corporations  are  delegated  powers,  and 
may  be  revoked,  or  be  limited  and  governed  in  their  exercise  in 
such  a  way  as  the  sovereign  authority  may  prescribe.  "Shall  the 
thing  formed  say  to  him  that  formed  it.  Why  hast  thou  made  me 
thus? " 

The  relinquishment  of  the  independent  power  of  rate  making  is 
only  the  surrender  of  a  power  that  may  be  exercised,  and  in  its 
untrammelled  state  is  constantly  exercised,  to  do  irreparable  mis- 
chief, and  which,  while  it  remains,  renders  government  efforts  at 
regulation  mostly  abortive.  The  general  result  of  its  surrender 
would  inevitably  be  a  maximum  of  good  and  minimum  of  evil. 

Judge  Cooley's  letter  in  1885  to  the  Cullom  committee  contained 
this  significant  paragraph : 

"The  question  then  presents  itself  whether  the  final  solution  for 
the  'railroad  problem'  is  not  likely  to  be  found  in  treating  the 
railroad  interest  as  constituting  in  a  certain  sense  a  section  by  it- 
self of  the  political  community,  and  then  combining  in  its  manage- 
ment the  state,  representing  the  popular  will  and  general  interests, 
with  some  definite,  recognized  authority  on  the  part  of  those  im- 


THE  RAILROAD  MALADY.  29 

mediately  concerned,  much  as  state  and  local  authority  are  now 
combined  for  the  government  of  municipalities.  Something  of 
the  sort  would  neither  be  unphilosophical  nor  out  of  accord  with 
the  general  spirit  of  our  institutions,  and  it  is  therefore  likely  at 
some  time  to  be  taken  into  serious  consideration  by  law  makers. 
If  the  state  reserves  to  itself  the  necessary  authority  to  protect  the 
public  against  unfair  practices,  she  may  well  leave  the  roads  to 
quarrel  over  the  infinite  variety  of  detail  in  the  adjustment  of 
rates,  taking  care,  however,  that  their  adjustment  shall  not  be,  as 
it  often  is  now,  purely  nominal,  but  one  to  be  adhered  to." 

Would  it  not  be  wise  for  railroad  managers  and  the  public  to 
direct  their  efforts  to  some  such  solution  of  the  railway  puzzle  ? 

Kingston,  N.  Y.,  Aug.  6,  1891. 


COMMENT   OF    HON.    ALDACE   F.   WALKER,    CHAIRMAN    WESTERN    TRAFFIC   ASSOCIATION. 

To  the  Editor  of  The  Railway  Review  : 

I  am  obliged  for  the  opportunity  you  have  given  me  to  examine 
the  proofs  of  Judge  Schoonmaker's  interesting  article  entitled 
"The  Railroad  Malady  and  its  Treatment,"  and  for  your  request 
that  I  also  write  you  upon  the  subject.  My  time  permits  no  more 
than  a  hasty  illusion  to  a  single  point.  I  think  that  Judge  Schoon- 
maker's severe  arraignment  of  Justice  Brewer's  recent  utterance 
on  the  subject  of  the  enforcement  of  contracts  must  have  been 
written  without  having  read  the  opinion  as  a  whole  and  without 
understanding  the  precise  point  of  the  remarks  which  are  criti- 
cised. Judge  Schoonmaker  apparently  thinks  that  Justice  Brew- 
er's suggestion  implies  that  railways  may  be  operated  through 
receiverships  established  by  the  court  of  equity,  and  that  it  is  pro- 
posed to  substitute  that  power  for  government  ownership  and 
control.  Having  this  thought  he  enlarges  upon  the  danger  of  the 
absorption  of  authority  by  courts. 

I  am  satisfied,  however,  that  nothing  was  further  from  Mr.  Jus- 
tice Brewer's  mind.  On  the  contrary  his  suggestion  varies  in  one 
respect  only  from  that  made  by  Judge  Schoonmaker  himself. 
The  proposition  of  Judge  Schoonmaker  is  that  congress  should  re- 
quire the  establishment  of  railway  federations  for  the  preparation 
of  interstate  tariffs,  which  he  says  would  be  little  more  than  the 
enlargement  of  existing  associations  and  the  legalization  of  their 
acts.  Justice  Brewer's  proposition  implies  that  the  existing  fed- 
erations are  legal  and  require  no  act  of  congress  to  compel  their 
formation  or  to  recognize  their  legality ;  and  that  being  legal  con- 
tracts they  are  enforceable  as  are  other  contracts  in  the  courts. 

For  a  court  of  equity  to  compel  the  specific  performance  of  con- 
tracts duly  made  between  competent  parties  is  no  new  jurisdic- 
tion ;  the  application  of  established  principles  to  new  cases  at  times 
seems  doubtful  until  it  has  become  an  accomplished  fact,  when 


30  THE  RAILROAD  MALADY. 

its  propriety  is  so  evident  that  one  is  surprised  that  the  doubt 
could  have  existed.  The  agreements  under  which  railway  asso- 
ciations are  formed  constitute  a  class  of  contracts  which  as  yet 
have  not  been  submitted  to  the  courts.  It  may  possibly  be  found 
that  in  some  of  these  agreements  sing-le  clauses  may  exist  of 
which  some  courts  would  decline  to  take  cognizance,  but  the  con- 
tracts as  a  whole,  and  especially  the  features  of  such  contracts 
which  relate  to  the  establishment  of  interstate  rates  by  federated 
action  subject  to  arbitration  of  differences,  are  unquestionably 
legitimate  at  the  present  time,  and,  more  than  this,  are  absolutely 
required  by  existing  legislation,  which  would  not  be  workable  in 
their  absence. 

Justice  Brewer's  suggestion  then  is :  that  the  courts  of  equity 
may  compel  the  performance  of  contracts  of  this  character  as  well 
as  of  other  contracts  of  a  continuing  nature.  This  thought  being 
admitted,  the  railway  situation  is  at  once  clarified.  The  '  'railroad 
malady"  is  seen  to  be  susceptible  of  treatment  in  the  precise  line 
suggested  by  Judge  Schoonmaker,  namely,  by  federation  in  the 
establishment  of  rates,  subject  to  restraint  in  case  rates  so  made 
become  excessive.  No  further  legislation  is  required.  As  in 
thousands  of  other  instances,  there  has  been  too  much  legislation 
already.  All  that  is  necessary  to  treat  existing  difficulties  in  the 
line  desired  by  Judge  Schoonmaker  is  simply  to  proceed  under 
existing  laws  in  the  making  and  execution  of  contracts  according 
to  existing  association  methods,  and  in  case  parties  to  such  con- 
tracts should  refuse  to  be  bound  by  the  terms  of  their  obligations 
thereunder,  submit  to  the  courts  the  question  of  the  right  of  their 
associates  in  the  agreement  to  compel  a  specific  performance 
thereof. 

Chicago,  Aug.  14,  1891.  Aldace  F.  Walker. 


THE  RAILROAD  PROBLEM.  . 

Hon.  Joseph  D.  Potts. 

The  question  of  transportation  is  one  of  the  weightiest  of  living 
topics.  It  has  grown  more  rapidly  than  it  has  been  comprehended ; 
and  the  commercial  health  of  the  nation  requires  that  this  condi- 
tion be  changed;  that  its  essential  principles  be  broadly  under- 
stood, and  the  proper  regulation  of  its  great  power  be  intelligently, 
justly,  and  completely  established. 

I  hope  you  will  not  consider  it  unfitting  if  I  refer,  by  way  of  a 
short  prelude,  to  what  may  be  deemed  the  genesis  of  transporta- 
tion ;  to  the  imperative  character  of  the  instincts  it  has  been  crea- 
ted to  gratify — instincts  which  have  grown,  and  which  will  con- 
tinue to  grow  in  volume  and  force,  as  means  for  their  gratification 
increase  in  extent,  in  excellence,  and  in  cheapness. 

The  impulse  to  movement,  to  motion,  to  change  of  locality, 
seems  inherent  in  all  matter.  The  great  spheres  which  occupy 
space  are  forever  moving ;  the  infinitesimal  atoms  of  which  matter 
consists  are  never  quiet,  excepting  under  restraint.  Animal  life 
has  its  recurring  periods  of  restlessness,  and  the  human  animal, 
man,  is  dominated  by  the  same  irresistible  law.  Only  the  re- 
straints of  inconvenience,  lack  of  physical  power,  and  lack  of  time, 
keep  mankind  within  reasonable  bounds  of  quietude.  The  posses- 
sion of  money  in  modern  times  somewhat  lessens  the  force  of  these 
restraints,  and  the  palpable  results  of  such  possession  have  led  an 
acute  observer  to  say  that  "when  a  rich  American  has  built  him- 
self a  house  in  the  city,  another  in  the  country,  and  a  cottage  by 
the  sea  or  in  the  mountains — then — he  travels."  The  motives  to 
movements  are  multitudinous ;  to  movements  of  persons,  of  prop- 
erty, of  ideas ;  motives  of  pleasure,  of  sorrow,  and  of  gain ;  the 
supply  and  reception  of  news,  and  the  demand  and  supply  for  and 
of  matehals  for  use  and  gratification.  These  motives  are  endless 
in  quantity  and  variety,  but  they  are  all  in  constant  activity;  and 
they  all  impel  and  compel  movement. 

The  palliation  and  the  partial  removal  of  the  forms  of  restraint 
just  named,  which  so  hamper  these  ever-present  impulses  to  move- 
ment, has  become  in  modern  days  one  of  the  greatest  of  human 
industries.     It  is  the  science  and  the  art  of  transportation. 

Address  delivered  before  the  Contemporary  Club,  Philadelphia.     Reprinted  by  permis- 
sion from  the  Railway  Review  of  June  4,  1892. 


32  THE  RAILROAD  PROBLEM. 

Let  us  g-lance  briefly  at  some  of  the  achievements  of  this  im- 
mense industry.  Instead  of  the  rugged  and  broken  natural  surface 
of  the  earth,  to  be  wearily  and  slowly  plodded  over  on  foot,  in 
danger,  with  exhausting  toil,  with  great  loss  of  useful  time,  and 
with  the  most  barbaric  discomfort,  we  have  the  smooth  railway 
and  vestibule  train,  and  we  eat  and  sleep  in  luxury,  comfort,  and 
safety,  while  gliding  easily  along  at  50  miles  an  hour.  The  great 
water  surfaces  of  the  globe,  upon  which  in  his  early  history  man 
could  not  safely  venture,  are  now  traversed  in  huge  vessels,  safely,, 
comfortably,  and  swiftly,  and  with  such  certain  punctuality  that 
spaces  of  thousands  of  miles  are  covered  with  variations  of  but  a 
few  hours  in  the  times  of  the  voyages ;  and,  indeed,  under  favor- 
ing conditions  of  sea  and  weather,  these  differences  are  measured 
by  minutes. 

Our  ideas  are  passed  from  point  to  point  with  still  greater  per- 
fection of  method.  The  telegraph,  the  telephone,  and  the  extra- 
ordinary postal  systems  of  civilized  countries,  especially  that  of 
the  United  States,  make  the  interchange  of  ideas  rapid  and  cheap 
to  a  degree  which  but  a  short  time  since  would  have  appeared  im- 
possible, unless  it  had  been  wrought  miraculously. 

If  we  turn  from  what  has  been  done  in  the  way  of  removing 
restraints  on  the  movement  of  man  and  his  belongings  to  the 
effect  which  such  partial  removals  have  worked,  we  will  find  the 
most  abundant  confirmation  of  the  declaration  already  made,  that 
the  tendency  to  movement  is  constant  and  all-pervading,  and  that 
nothing  but  natural  hindrances  prevent  its  increasing  conversion 
from  tendency  to  deed. 

Bear  in  mind  that  transporters  have  not  wholly  removed  diffi- 
culties ;  they  have  only  modified  some  of  them,  and  this,  in  part, 
by  converting  them  into  a  new  form  of  difficulty,  the  new  form 
being  a  charge  of  money.  Instead  of  spending  time  and  strength 
in  tramping  from  place  to  place,  the  traveler  buys  a  ticket,  for 
which  he  disburses  money ;  instead  of  carrying  his  goods  on  his 
back  througfh  the  wilderness,  he  pays  a  freight  rate,  and  for  the 
sending  of  his  letters  3,000  miles,  he  uses  a  stamp  which  costs  him 
two  cents. 

He  can  earn  the  requisite  cash  for  the  ticket,  for  the  freight 
rate,  and  for  the  stamp,  with  much  less  outlay  of  time  and  of  labor 
than  was  required,  when,  by  his  own  efforts,  his  person  or  his 
property  was  moved ;  so  that,  while  this  movement  is  still  under 
restraint,  still  subject  to  whatever  difficulties  may  be  represented 
by  the  rates  of  charge  and  the  conditions  made  by  transporters, 
his  restraint  has  been  greatly  lessened,  and  the  extent  of  move- 
ment has,  therefore,  been  greatly  enlarged. 

I  don't  wish  to  worry  you  with  statistics,  but  I  will  venture  to 
give  you  a  few  figures,  because  in  no  other  way  can  you  be  so 
briefly  shown  how  increases  in  movement  have  followed  the  phy- 
sical improvements  and  the  lessened  cost  already  established  by 
transporters. 


THE  RAILROAD  PROBLEM.  33 

Take  an  example  from  the  movement  of  property: 

On  the  railroads  of  the  United  States  the  average  charge  for 
moving  one  ton  of  property  one  mile  was — 

In  1880 I,  29-100  cents 

In  1890 93-100  cents 

The  tons  moved  one  mile  per  each  person  of  the  entire  popula- 
tion of  the  United  States  were — 

In  1880 645 

In  1890 1,265 

That  is,  the  reduction  in  rates  was  a  little  more  than  one-fourth 
per  ton,  while  the  increase  in  movement,  per  person,  was  nearly 
doubled. 

Take  an  example  from  the  movement  of  letters : 

The  rate  of  letter  postage  charged  by  the  United  States  was — 

In  1880,  for  half  ounce  or  less 3  cents 

In  1890,  for  an  ounce  or  less 2  cents 

The  movement  of  letters  through  the  mails  during  the  same  years, 
for  each  person  of  the  entire  population,  was — 

In  1880,  approximately, 21 

In  1890,  approximately, 30 

Disregarding  the  effect  of  the  change  in  maximum  weight,  as 
an  effect,  the  extent  of  which  cannot  now  be  ascertained,  we  find 
the  result  in  the  reduction  of  charges  of  one-third  per  letter,  and 
an  increase  in  movement  of  nearly  one-half  per  person. 

All  hindrances  to  movement,  however,  are  not  yet  represented 
by  a  charge.  Some  loss  of  time  is  yet  involved,  and  in  the  cases 
of  long  journeys,  very  much  time  which  often  can  be  illy  spared. 
Our  practical  speed,  however,  is  yet  slow — not  over  50  miles  an 
hour — and  betterments  in  this  respect  can  be  reasonably  hoped  for. 
It  is  much  slower  than  certain  varieties  of  birds  are  said  to  have 
attained,  and  what  birds  have  done,  man  can  probably  do.  Some 
bodily  wear  and  tear  is  yet  a  necessity,  and  this  may  never  be 
wholly  removed,  but  it  is  certainly  lessened  yearly. 

The  chief  hindrances  of  to-day  are  represented  in  part  by  the 
tariff  conditions  of  transporters,  and  by  their  rates  of  charge,  es- 
pecially by  the  irregularities  and  discriminations  of  such  rates, 
and  by  their  sudden  and  severe  fluctuations.  They  are  also  rep- 
resented, in  part,  by  suddenly  developed  incompetencies  of  trans- 
porters to  meet  sudden  growths  of  movement ;  or  to  meet,  prompt- 
ly, clearly  foreseen  increases  in  demands  for  track,  power  and 
carriage  facilities.  And  they  are,  finally,  also  represented,  to  a 
large  extent,  by  the  evil  results  of  many  unwisely  conducted 
struggles  for  traffic,  and  for  monopoly  of  position,  which  are 
waged  between  railway  corporations,  and  which,  by  a  curiously 
weak  misnomer,  are  classified  under  the  title  of  competition. 

It  is  a  consideration  of  some  of   these  existing  obstacles,  which 

3 


34  THE  RAILROAD  PROBLEM. 

bar  our  way  to  more  effective  transportation  conditions,  that  I 
will  now  ask  your  attention. 

Perhaps  our  perception  of  the  evils  we  suffer  from,  and  of  the 
-possible  remedies  for  them,  may  be  quickened  and  clarified  by 
first  making  plain  to  our  minds,  what  conditions  of  transportation 
capacities  we  would  like  to  have — what  conditions,  which,  in  the 
light  of  present  knowledge,  will  probably  be  improvements  on 
those  we  now  possess,  and  yet  not  be  beyond  a  reasonable  hope 
of  practical  attainment.  To  set  forth  these  new  and  desirable 
conditions  with  any  approach  to  adequate  fullness,  I  have  found 
to  be  quite  impossible  within  the  limits  of  time  permitted  by  a 
proper  regard  fo;r  your  patience.  I  can,  therefore,  but  hint  at  a 
few  of  their  outlines ;  and,  indeed,  I  have  been  obliged  to  restrict 
these  hints  to  the  subject  of  property  movement  only,  and  that  by 
railway  within  the  United  States. 

First,  then,  we  must  have  reasonable  rates  of  charge,  and  rea- 
sonable stability  in  such  rates,  so  that  the  great  interchanges  of 
traffic  will  not  have  possible  ruin  always  impending  over  their  own- 
ers, through  sudden  and  violent  changes  in  tariffs.  To-day  all 
traffic  is  so  exposed,  and  many  severe  and  costly  demonstrations 
of  this  truth  have  made  the  boldest  commercial  minds  timid  and 
halting  in  their  movements,  excepting  when  they  can  procure,  in 
advance,  and  from  competent  authorit}^,  assurances  against  such 
risks.  Communities  which  possess  two  or  more  really  competitive 
routes,  equally  effective  and  far-reaching,  are  less  exposed  to  this 
danger  than  others.  It  is  indeed  a  frequent  practice  for  a  trans- 
porter to  maintain  high  charges  to  or  from  points  which  no  other 
transporter  can  reach,  while  making  low  rates  to  and  from  other 
points  which  are  in  competition  with  rivals.  There  are  few  prac- 
tices more  tempting  to  the  transporter,  but  none  more  ill-judged, 
nor  more  permanently  harmful  to  both  transporter  and  locality. 
It  is  an  abominable  evil,  which  should  be  absolutely  suppressed. 

Stability  must  be  attained,  however,  by  means  that  will  not 
stifle  improvement.  Destructive  competition  has,  as  its  one  good 
effect,  the  betterment  and  cheapening  of  methods;  but  surely  our 
civilization  is  not  at  this  day  so  crude  that  progress  in  method 
cannot  be  won  in  better  ways  than  by  the  destructiveness  of  the 
savage. 

Next:  we  must  have  a  greater  approximation  to  uniformity  in 
rates  of  charge,  and  absolute  freedom  from  inequitable  discrimi- 
nation between  shippers.  The  big  shippers  must  not  be  charged 
so  much  less  than  the  little  shippers,  that  the  little  ones  shall  per- 
ish and  the  big  ones  find  their  business  increasingly  swollen.  It 
is  proper  and  necessary  to  have  a  wholesale  rate  and  a  retail  rate 
of  charge ;  but  the  basis  of  the  wholesale  rate  must,  both  for  the 
public  benefit  and  the  interest  of  the  transporters,  be  small  enough 
to  be  attained  by  the  many,  and  not  so  large  that  it  can  only  be 
reached  by  the  few. 


THE  RAILROAD  PROBLEM.  35 

Again:  we  must  have  a  separation  of  terminal  and  transfer 
charges  from  the  road  charges.  Terminals  and  transfer  facilities 
are  costly,  and  their  expenses  cannot  be  easily  cheapened.  The 
great  future  economies  will  be  made  in  the  movement  between 
terminals,  and  it  is  this  movement  which  the  individual  members 
of  the  public  cannot  provide  cheaply,  each  for  himself.  It  is  here 
that  the  main  usefulness  of  the  great  transporter  is  found.  Many 
shippers  prefer  to  provide  their  own  terminals  and  do  their  own 
terminal  work.  When  they  can  do  so  they  should  have  the  right 
to  do  so,  and  they  should  not  be  charged  for  what  they  do  them- 
selves. 

Again :  we  must  have  a  separation  of  road  charges  into  charges 
of  a  certain  amount  when  cars  are  furnished  by  the  road  owner, 
and  charges  of  a  less  amount  when  cars  are  furnished  by  others. 
Many  prefer  to  furnish  their  own  cars,  and  should  be  allowed  to 
do  so,  and  such  division  of  the  total  road  charges  should  be  made 
as  will  fairly  apportion  them  according  to  the  relative  capital  and 
risk  of  each  interest.  This  should  apply,  whether  the  car  owner 
carries  traffic  for  himself  or  for  others.  Under  this  regulation, 
shortage  in  car  supplies  will  become  less  frequent,  and  the  railway 
will  approximate  the  character  of  a  common  highway ;  a  result 
much  to  be  desired. 

Again:  we  must  have,  within  defined  limits,  a  practical  blend- 
ing, for  the  movement  of  cars  and  property,  of  all  the  railroads  of 
the  country,  as  they  are  now,  and  as  they  may  be  hereafter,  into 
a  single  effective  system.  That  is,  the  rates  of  road  charges 
should  be  on  a  mileage  basis  and  should  apply  to  the  total  mileage 
any  shipment  they  make,  regardless  of  the  fact  that  it  may,  in  its 
transit,  pass  over  many  roads  differently  owned.  This  will  be 
easily  accomplished  if  the  divisions  of  the  road  charges  already 
suggested  be  made,  and  if  every  road  be  compelled  to  move,  with 
impartial  promptness,  over  its  tracks  (but  not  into  its  terminals) 
every  suitable  car  which  may  be  offered  to  it. 

Proper  rules  as  to  such  interchange  of  cars,  including  also  just 
requirements  as  to  the  character  of  the  cars,  should,  of  course,  be 
established. 

Again :  railroad-owners,  as  one  of  their  duties,  should  be  under 
compulsion  to  be  suitably  supplied  with  tracks  and  power.  This 
is  a  question  of  difficulty,  and  ought  not  to  be  adjusted  inequitably; 
but  it  should  not  be  left,  as  it  now  is,  wholly  to  the  degree  of 
providence  or  foresight,  financial  skill  or  commercial  courage, 
possessed  by  each  such  road-owner. 

These  leading  changes  impress  me  as  absolutely  essential  to  be 
made,  and  made  as  speedily  as  may  be  consistent  with  equity, 
legal  power  practicability  and  good  judgment.  They  will  consti- 
tute, I  believe,  a  set  of  fairly  effective  remedies  for  the  main  im- 
perfections yet  developed  in  our  present  vsystem  of  inland  traffic 
movement.     There  are,  of  course,  other  difficulties  needing  cure, 


36  THE  RAILROAD  PROBLEM. 

including  difficulties  local  to  cities  and  to   all  closely-settled  com- 
munities, which  I  cannot  touch  on  now. 

If  what  I  have  said  be  correct,  we  have  then  to  consider  the 
equities  involved  in  these  changes ;  afterward  the  legal  power  to 
make  them;  and,  finally,  the  practical  method,  if  any  can  be 
found,  of  accomplishing  them. 

And  first,  what  equities  are  to  be  considered?  ■  I  take  it  no 
American,  in  his  movements  of  sober  thought,  will  feel  that  any 
readjustment  of  conditions  can  stand,  or  ought  to  stand,  or  will 
produce  permanently  useful  results,  unless  they  be  founded  on 
equity. 

When,  early  in  this  century,  the  movement  began  among  civi- 
lized nations,  looking  to  inland  transportation  upon  a  scale  beyond 
all  precedent,  each  large  community  turned  naturally  to  its  gov- 
ernments, municipal,  provincial,  state  or  national,  as  the  only 
available  organizations  competent  to  provide  for  a  common  need ; 
the  cost  and  apparent  risk  of  which  were  so  much  beyond  the 
range  of  individual  power.  Moreover,  the  idea  of  a  common  high- 
way was  properly  a  dominant  one.  Hence  states  built  canals  and 
railways,  and,  later,  lesser  communities  joined  interests  with  in- 
dividuals in  constructing  like  works.  The  national  government 
of  the  United  States  built  a  great  macadamized  road.  European 
governments  embarked  largely  in  the  improved  form  of  highways. 
Certain  disadvantages  in  many  cases  were  soon  developed  under 
governmental  ownership  and  operation.  Political  necessities  often 
took  precedence  of  commercial  necessities,  and  the  governmental 
management  became  frequently  incompetent  and  tainted. 

Most  communities  in  this  country  grew  satisfied  that  the  element 
of  individual  interest  must  be  introduced  to  secure  transportation 
efficiency,  and  avoid  governmental  deterioration.  The  introduc- 
tion of  such  an  interest  soon  became,  with  a  few  exceptions,  the 
general  rule  here,  and  forms  of  corporate  organization  were  evol- 
ved, in  which,  under  restrictions  for  the  public  protection,  thought 
at  the  time  to  be  sufficient,  but  which  have  often  since  proved  in- 
adequate, the  private  interest  of  the  transporter  became  the  lead- 
ing motive,  and  the  convenience  and  interest  of  the  public  subor- 
dinate considerations,  excepting  when  and  as  it  became  clear  to 
the  transporter  that  deference  to  the  latter  motives  would  contri- 
bute to  his  own  prosperity. 

Vast  amounts  of  individual  money  have  been  invested  in  this 
form  of  public  service,  under  the  belief  that  this  relation  of  inter- 
ests would  always  continue. 

It  would  be  unfair  to  sacrifice  to  any  proper  degree  these  indi- 
vidual interests,  thus  authoritatively  called  into  existence ;  but  the 
time  seems  to  have  arrived  when  through  the  processes  here  sug- 
gested, or  such  other  processes  as  may  seem  to  be  wiser,  but  in 
any  case  by  processes  which  shall  be  mutually  just,  the  public  ser- 
vice must  take  the  front  place  as  a  motive,  and  the  private  interest 
of  the  transporter  an  equitable,  but  a  secondary  position. 


THE  RAILROAD  PROBLEM.  •  37 

The  next  point,  that  of  legal  power,  is  one  which  I  think  need 
hardly  be  considered  at  present.  Under  our  form  of  government, 
whatever  a  sufficient  number  of  the  people  ultimately,  and  after 
full  consideration,  decide  shall  become  the  law,  will  be  made  the 
law,  and  the  present  moment  is  the  time  for  discussion  and  for 
experimenting,  and  not  for  much  law-making.  We,  therefore, 
come,  finally,  to  the  consideration  of  methods  of  reformation. 

Railroad  owners  are  clearly  unable  to  introduce  such  methods 
unaided.  .  They  have  tried  to  harmonize  in  various  ways  ever 
since  the  dawn  of  competition  among  them,  and  their  efforts  have 
been  but  a  continuous  succession  of  short-lived  pacifications,  alter- 
nated with  longer  periods  of  mutual  reproaches,  impartially  dis- 
tributed breaches  of  faith,  and  bitter  and  destructive  rate  wars, 
track  wars,  and  wars  over  every  other  species  of  difference  be- 
tween them.  The  public  look  with  disfavor  upon  peace  confer- 
ences between  railroad  companies,  and  in  fact  have  now  made 
pooling  unlawful.  The  pool  was,  perhaps,  the  most  nearly  suc- 
cessful form  of  traffic  combination,  on  a  great  scale,  ever  made  in 
this  country ;  but  it  was  only  imperfectly  maintained ;  and  when 
its  provisions  seriously  pinched  the  prosperity  of  any  member,  the 
pool  was  only  preserved  because  those  members  whose  interests 
it  was  aiding,  winked  at  the  secret  remedial  methods  resorted  to 
by  the  member  whose  interests  it  was  harming. 

The  public  disfavor  would  not  have  been  unwise  had  the  pool 
been  perfect.  Such  a  huge  combination  of  almost  unchecked 
power  over  the  fortunes  of  citizens  would  have  certainly  been  un- 
wholesome, and  might  easily  have  grown  dangerous.  But  the 
natural  existing  conditions  make  pooling  substantially  harmless  at 
present,  and  its  illegality  is,  therefore,  at  this  time  a  needless 
safeguard. 

The  separate  states  are  clearly  incompetent  to  establish  efficient 
regulations.  Their  jurisdiction  is  limited  to  their  own  boundaries, 
while  the  controlling  traffic  is  continental. 

There  is  but  one  power  which  can  deal  with  the  subject  effect- 
ively, and  that  is  the  government  of  the  United  States.  This 
power  has  made  a  movement  in  this  direction  by  enacting,  and  to 
some  extent,  enforcing,  the  interstate  commerce  law.  The  move- 
ment has  been  useful,  but  less  so  than  was  hoped  for.  It  has 
cured  something,  and  has  probably  tended  to  prevent  more  harm 
than  it  has  discovered  or  punished.  The  commission  created 
under  it  has  labored  under  a  radical  disadvantage  in  not  having 
among  its  members  either  trained  transporters  or  capable  mer- 
chants or  manufacturers,  and  of  being  loaded  with  duties  which 
entirely  overtax  a  single  tribunal.  If  it  was  confined  to  the  duty 
of  interpretation,  and  if  the  duty  of  enforcement  was  divided 
among  a  number  of  other  tribunals,  the  results  should  be  better. 
The  power  it  claims,  of  determining  absolutely  the  rates  of 
charge,  is  a  dangerous  power,  which  transporters  are  naturally 


38 


THE  RAILROAD  PROBLEM. 


contesting,  and  which,  if  it  exists,  should  doubtless  be  modified. 

The  precise  relation  which  the  national  government  should 
adopt  toward  this  question  is  very  uncertain  in  the  public  mind. 
Government  ownership  and  operation  are  urged,  but  I  think  this 
view  is  not  held  by  those  who  have  carefully  studied  the  subject. 
Such  a  course  is  open  at  present  to  many  objections,  some  of 
which  seem  vital. 

Probably  the  wisest  relation  it  can  now  establish  is  that  of  a 
controlling  regulator.  Tariffs  of  charge  and  tariff  conditions  can- 
not be  made  with  good  judgment,  excepting  by  trained  experts, 
and  such  experts  are  to  be  found  almost  wholly  engaged  in  per- 
forming the  active  duties  of  transporters;  therefore  such  tariffs 
should  be  primarily  framed  by  the  transporters  themselves. 

Railroad  owners  can  be  forced  by  suitable  national  legislation 
to  wholly  forego  participation  in  foreign  or  interstate  business, 
unless  they  unite  in  certain  prescribed  relations. 

These  relations  should  comprise  proper  regulations  and  agree- 
ments for  the  proper  conduct  of  all  their  business,  and  proper 
conditions  and  rates  of  charge ;  all  upon  the  bases  finally  deter- 
mined upon.  Such  agreements,  after  formulation,  should  be  sub- 
ject to  the  judgment  of  a  national  tribunal  composed  of  capable 
lawyers,  transporters,  and  shippers.  In  cases  of  irreconcilable 
differences  between  that  tribunal  and  the  transporters,  such  dif- 
ferences should  be  controllingly  passed  on  by  the  supreme  court 
of  the  nation.  Variations  in  form  or  essence  from  such  rates  and 
regulations  while  in  force,  should  be  punishable  by  heavy  penal- 
ties, both  corporate  and  individual ;  and  the  detection  of  such 
offences  and  their  punishment  should  be  done  at  the  national  cost, 
and  before  any  one  of  a  sufficient  number  of  national  courts  to 
insure  convenience  and  prompt  results.  A  few  important  convic- 
tions and  punishments  would  probably  make  the  subsequent  legal 
business  of  this  sort  quite  limited  in  quantity.  Changes  in  either 
rates  or  rules  thus  established  should  be  made  only  by  the  same 
authorities,  and  through  the  same  formal  processes  as  the  originals. 

These  suggestions,  and  perhaps  all  suggestions  having  similar 
purposes,  will  hardly  commend  themselves  to  the  existing  railway 
owner.  No  curtailment  of  privilege  or  power  ever  seemed  wise 
at  first,  to  him  who  suffered  such  loss.  But  it  should  not  be  for- 
gotten that  this  power  is,  in  the  aggregate,  greater  over  the  for- 
tunes of  the  people  than  any  ever  before  possessed,  even  by  gov- 
ernments in  times  of  peace,  if  the  governments  were  free.  The 
people  of  several  of  our  states  have  already  grown  so  restless 
under  the  existence  of  this  power  and  some  of  the  evil  results, 
that  laws  bearing  a  painful  leaning  toward  confiscation  have  been 
enacted.  Such  laws,  of  course,  hurt  both  sides,  as  all  inequitable 
action  always  does ;  but  they  have  been  made,  and  will  probably 
have  worse  successors,  unless  enlightened  and  competent  reme- 
dies, consistent  with  peace,  be  established. 


THE  PUBLIC  AND  THE  RAILWAYS. 

By  the  Hon.  Shelby  M.  Cullom, 

United  States  Senator  from  Illinois. 

The  history  of  railroads  in  the  United  States  is  very  interesting, 
exhibiting  as  it  does  the  growth  and  development  of  a  system 
superior  in  all  respects  to  that  of  any  other  country.  In  a  little 
more  than  sixty  years  the  railroad  mileage  in  this  country  has  in- 
creased from  23  miles,  in  1830,  to  over  170,000  miles,  in  1892. 
Railroads  have  been  regarded  as  public  highways;  but  their  pres- 
ent relation  to  the  public  has  greatly  changed  from  that  which 
existed  when  they  were  first  being  built.  For  a  time  they  were 
regarded  as  public  highways  in  the  broadest  sense,  subject  to  use, 
upon  paying  toll  to  the  owners,  by  all  who  desired  to  avail  them- 
selves of  them,  and  who  could  furnish  their  own  motive  power 
and  vehicles  of  carriage.  It  was  not  long,  however,  before  this 
idea  became  obsolete,  and  railroad  charters  were  granted  to  asso- 
ciations organized  for  the  purpose  of  building  railroads,  and  such 
privileges  and  grants  of  power  were  given  to  corporations  as  made 
the  roads  monopolies  instead  of  highways  to  be  used  by  the  people 
generally.  These  corporations  were  given  control  over  their  rail- 
road lines  as  against  all  the  world,  except  as  the  States  might 
insist  upon  controlling  their  action,  and,  finally,  except  as  Con- 
gress might  provide  for  their  regulation  under  the  National  Con- 
stitution. 

Railroads  in  this  country  have  been  built  almost  entirely  by 
private  capital.  True,  a  few  railroads  have  been  assisted  by  the 
Government,  by  the  donation  of  lands,  and  by  the  issuance  of 
bonds  in  aid  of  their  construction ;  and  some  have  been  aided  by 
the  States  and  municipalities.  But  whether  built  by  private  capi- 
tal or  aided  by  the  Government,  the  States  in  which  roads  have 
been  constructed  have  for  many  years  claimed  the  right  of  con- 
trolling or  regulating  their  conduct.  When  the  doctrine  that  the 
States  had  the  power  of  regulation  or  control  over  railroads  was 
first  asserted,  especially  when  the  attempt  to  declare  such  control 
by  provisions  in  constitutions  and  statutes  was  made,  earnest  re- 
sistance was  shown,  and  the  lawyers  of  the  country  generally  de- 
nounced such  assertion  of  authority  as  subversive  of,  and  in  an- 
tagonism to,  all  the  settled  principles  established  by  the  courts  in 

Reprinted  by  permission  from  the  Independent  of  October  6,  1892. 


40  THE  PUBLIC  AND  THE  RAILWAYS. 

the  earlier  history  of  the  country.  There  is  now,  however,  no 
dispute  as  to  the  right  of  the  States  within  their  respective  juris- 
dictions and  of  Congress  within  its  constitutional  jurisdiction, 
to  regulate  commerce ;  and  the  power  to  regulate  commerce,  car- 
ries with  it  the  power  to  regulate  railroads,  as  common  carriers 
doing  the  business  or  carrying  on  the  commerce  of  the  country. 

Some  one  has  said  that  the  ownership  of  railroads  is  private; 
the  use  is  public.  Railroad  corporations  are  called  public  corpora- 
tions, and  as  such  are  granted  special  privileges.  They  are 
granted  the  right  of  eminent  domain.  In  order  that  they  may  the 
better  serve  the  public  they  are  granted  powers  more  enlarged 
than  are  those  given  to  private  corporations.  They  are  called 
common  carriers,  and  are  required  to  carry  passengers  and  prop- 
erty for  all  alike,  and  are  entitled  to  reasonable  compensation 
therefor.  Under  the  common  law,  common  carriers  have  no  right 
unjustly  to  discriminate  between  persons  or  places  in  the  conduct 
of  their  business  for  the  people.  The  railroad  corporations  of  the 
country  are  the  creatures  of  legislative  power;  as  such  they  are 
subject  to  control  or  regulation  by  their  creator;  and  yet  any  act 
of  a  State  Legislature  or  of  Congress,  by  the  terms  of  which  a 
railroad  company  would  be  authorized  to  impose  upon  the  public, 
would  be  set  aside  by  the  courts. 

Mr.  Choate  years  ago  said  that  the  railroads  were  made  for  the 
people,  not  the  people  for  the  railroads.  Notwithstanding  this 
manifest  truism,  before  any  regulation  of  common  carriers  was 
attempted,  either  by  the  States  or  the  National  Government,  a 
condition  of  things  grew  up  in  this  country  which  seemed  to  indicate 
that  those  engaged  in  operating  railroads  believed  that  the  people 
were  made  for  the  railroads ;  and  apparently  there  are  men  still 
engaged  in  that  business  who  do  not  seem  to  comprehend  the  true 
legal  status  of  railroad  corporations.  They  are  said  to  be  at  com- 
mon law  quasi-public  servants,  as  it  is  expressed  by  some  writer. 
The  State  has  no  right  to  exercise  an  arbitrary  power  over  rail- 
road corporations  unrestrained  by  principles  of  right  and  justice ; 
it  has  no  right  to  pursue  a  policy  of  regulation  or  control  which 
will  destroy  the  value  of  the  property.  A  stockholder  in  a  rail- 
road corporation  owns  his  stock  as  fully,  and  is  entitled  to  as 
much  consideration  in  respect  to  his  rights,  as  if  he  were  a  stock- 
holder in  any  other  enterprise ;  and  the  State  is  bound  to  respect 
those  rights. 

There  are,  as  has  been  intimated,  two  jurisdictions  over  rail- 
roads in  this  country ;  first  the  State,  next  Congress.  The  States 
exercised  control  over  railroads  many  years  before  Congress  at- 
tempted any  substantial  regulation  of  commerce  among  the  States. 
The  States  are  confined  to  their  respective  jurisdictions;  but  in 
the  absence  of  Congressional  regulation  of  commerce  among  the 
States  the  courts  decide  that  the  States  may  pass  laws  requiring 
railroad  corporations  to  perform  certain  acts,   even  though  the 


THE  PUBLIC  AND  THE  RAILWAYS. 


41 


transportation  is  not  wholly  within  the  State,  especially  if  such 
action  is  a  police  regulation. 

With  the  exception  of  two  brief  acts,  regulation  by  Congress  is 
of  recent  date,  the  National  Legislature  never  having  attempted 
any  general  regulation  of  commerce  until  the  Act  of  1887.  The 
people  who  lived  under  the  old  Confederation  of  States  became 
dissatisfied  with  it,  because  under  that  system  of  Government 
they  could  not  secure  a  uniform  regulation  of  commerce.  Every 
State  set  up  for  itself.  The  necessities  of  trade,  however,  de- 
manded a  different  form  of  government,  a  government  by  the 
people  in  one  union.  Hence,  the  adoption  of  the  Constitution  of 
1789,  which  contains  a  provision  expressly  giving  to  Congress  the 
power  to  regulate  commerce  with  foreign  nations  and  among  the 
several  States.  This  power  carries  with  it  the  power  to  regulate 
railroads,  inasmuch  as  they  are  the  instruments  or  means  by 
which  commerce  is  carried  on.  Courts  say  that  cars  and  railroads 
are  the  vehicle  and  means  by  which  commerce  is  moved;  and,  in 
fact,  they  become  a  part  of  commerce  itself. 

We  have  in  this  country,  therefore,  a  dual  system,  the  States 
regulating  commerce  or  railroads  within  their  respective  jurisdic- 
tions as  to  domestic  or  State  commerce,  and  the  National  Gov- 
ernment, under  acts  of  Congress,  regulating  the  commerce  among 
the  States,  including  the  means  for  carrying  it  on.  The  efforts 
of  the  States  alone  to  control  the  operations  and  conduct  of  rail- 
roads failed  to  meet  the  necessities  and  to  prevent  the  railroad  cor- 
porations of  the  country  from  dealing  with  the  people  unjustly, 
because  the  States  could  only  exercise  control  of  svmh  corpora- 
tions within  their  respective  jurisdictions  and  doing  business 
within  the  State.  A  much  larger  portion  of  the  commerce  of  the 
country  has  become  interstate,  and  under  the  Constitution  of  the 
United  States  the  several  States  have  no  jurisdiction  over  it. 
Therefore,  finallv,  after  long  years  had  elapsed,  in  which  the  com- 
mercial clause  of  the  Constitution  had  never  been  appealed  to  by 
the  legislative  power  of  the  Government,  the  Act  of  1887,  to  regu- 
late commerce  among  the  States,  was  passed ;  and  it  may  not  be 
amiss  for  me  briefly  to  refer  to  it.  It  provides  that  all  charges  in 
connection  with  the  transportation  of  passengers  and  freight  shall 
be  reasonable,  and  declares  unlawful  and  prohibits  discriminations 
of  all  kinds,  and  undue  or  unreasonable  preference  or  advantage. 
The  Interstate  Commerce  Law  does  not  seek  to  change  property 
rights,  but  simply  to  enforce  common  law  principles.  The  act 
declares  the  law  and  provides  for  its  better  enforcement  by  pro- 
viding for  a  Commission  with  certain  powers — they  are  limited — 
and  while  many  able  men  believed  when  the  act  was  under  dis- 
cussion in  Congress  that  greater  power  was  given  to  the  Commis- 
sion than  it  ought  to  possess,  yet  I  think  that  the  general  judg- 
ment now  is  that  even  greater  power  should  be  conferred  upon  it. 
The  great  reason  for  the  law  was  to  provide  a  system  of  law  by 


42  THE  PUBLIC  AND  THE  RAILWAYS. 

which  the  people  deaUng*  with  the  railroad  corporations  doing  an 
interstate  business  should  have  a  remedy  for  wrongs  committed 
within  easy  reach  and  one  that  would  be  inexpensive.  The  find- 
ings or  decisions  of  the  Commission  are  not  final.  They  may  be 
appealed  from  to  the  courts,  and  unless  some  way  is  devised  by 
which  the  findings  of  the  Commission  shall  be  conclusive  the  ele- 
ments of  dispatch  and  cheapness  will  prove  a  delusion.  This  is 
the  problem  now  under  consideration  by  the  Senate  Committee 
on  Interstate  Commerce.  There  has  been  much  discussion  as  to 
the  wisdom  of  the  fourth  and  fifth  sections  of  the  act,  the  former 
known  as  the  long  and  short  haul  provision  and  the  latter  as  the 
anti-pooling  section.  The  practice  which  obtained  prior  to  the 
act  to  regulate  commerce  of  charging  more  for  the  shorter  than 
for  the  longer  distance  constituted  one  of  the  worst  evils  in  con- 
nection with  the  transportation  business.  I  will  not  detail  the 
many  hardships  and  the  gross  injustice  that  this  form  of  discrimi- 
nation worked.  Suffice  it  to  say  that  freight  was  frequently 
carried  for  the  same  or  a  less  rate  a  longer  haul  by  several  hun- 
dred miles  than  the  same  commodity  was  carried  the  shorter  dis- 
tance. 

Referring  to  the  anti-pooling  section,  the  most  glaring  abuses 
known  to  railroad  management  occurred  during  the  existence  of 
pooling  and  prior  to  the  passage  of  the  Interstate  Commerce  Act. 
The  impression  grew  in  the  minds  of  the  people  that  pools  were 
not  only  used  as  a  means  of  preventing  competition,  but  to  in- 
crease and  maintain  high  rates.  On  the  other  hand,  the  railroads 
claim  that 'their  sole  object  was  the  prevention  of  rate  wars,  dis- 
astrous both  to  shippers  and  roads  alike,  and  that  their  tendency 
was  to  maintain  stable  and  uniform  rates.  There  are  wide  differ- 
ences of  opinion  on  the  question  of  pooling.  Men  engaged  in  con- 
ducting railroads  generally  favor  it,  business  men  differ,  while 
students  of  railroad  problems  generally  believe  that  pooling  is  nec- 
essary in  the  interest  of  stability  of  rates.  The  great  majority  of 
people  do  not  believe  that  pooling  should  be  allowed  even  though 
under  the  supervision  of  the  Commission. 

Having  briefly  defined  the  relation  of  the  Government  to  the 
railways  and  the  nature  and  extent  of  Government  supervision,  I 
shall  next  speak  of  the  public  reasons  for  Government  regulation. 

The  failure  of  the  courts  to  afford  prompt  and  inexpensive  re- 
lief to  the  complainants ;  the  inability  of  state  agencies  to  cope 
with  interstate  traffic,  by  reason  of  the  power  given  congress  by 
the  Constitution  to' regulate  commerce  among  the  states,  and 
the  apparent  disposition  of  railroad  managers  to  regard  carriers  as 
a  law  unto  themselves,  were  the  chief  causes  of  the  act  to  regulate 
commerce.  The  magnificent  railroad  system  of  the  country  had 
grown  up  without  legal  restraint.  The  rights  of  private  citizens 
and  of  localities  were  as  naught  compared  with  the  will  of  rich 
and  powerful  corporations.     State  charters  of  railroad  corpora- 


THE  PUBLIC  AND  THE  RAILWAYS.  43 

tions  were  secured  and  sold  or  bartered;  and  the  obligations  to 
the  public  were  disregarded,  and  discrimination  and  extortion 
followed.  Soulless  corporations,  of  insatiable  greed  and  rapacity, 
of  immense  strength  financially  and  politically,  regarding  them- 
selves as  superior  to  all  law,  could  not  forever  go  unchecked  and 
unrestrained  in  their  course  of  selfish  aggrandizement.  Those 
roads  which  attempted  to  conduct  their  business  on  sound  busi- 
ness principles,  with  due  recognition  of  their  public  functions, 
were  driven  into  bankruptcy  by  the  methods  of  their  competitors 
or  compelled  to  conform  their  course  to  that  of  their  unprincipled 
rivals. 

It  is  not  for  me  to  say  what  would  have  been  the  ultimate  re- 
sult of  the  lawless  course  of  the  majority  of  the  roads  if  allowed 
to  go  unhampered  by  legislative  restrictions.  To-day  we  are  in- 
formed that  the  railroad  interest  represents  a  capital  of  ten  billion 
dollars,  employing  on  June  30th,  1890,  an  army  of  seven  hundred 
and  fifty  thousand  persons.  It  will  not  be  an  exaggeration  to  say, 
I  am  sure,  that  such  a  system,  with  common  interests,  and  of  rap- 
idly increasing  proportions,  would  have  rivalled  the  Government 
in  power  in  a  little  time  longer,  and  it  is  not  strange  that  such  a 
power  would  resist  any  positive  governmental  regulation  and  con- 
trol. It  did  not  come  too  soon,  and  has  not  come  yet  with  suffi- 
cient power.  , 

Looking  now  at  the  advantage  both  to  the  public  and  to  the 
railways  of  a  wise  system  of  regulation,  what  can  be  said?  The 
present  legislation,  while  unquestionably  imperfect  in  many  ways — 
and  certainly  it  is  faulty — is  formulated  on  correct  principles,  and 
in  my  opinion,  it  is  destined  to  remain  in  active  force.  Future 
amendatory  legislation,  as  time  and  experience  disclose  the  defects 
and  weaknesses  of  the  present  act,  will  strengthen  the  law  and 
increase  the  possibilities  of  its  beneficent  results. 

As  showing  the  advantages  which  the  people  have  derived  from 
the  tentative  enactment  of  1887,  and  amendments  thereto,  it 
would  be  interesting  to  recall  some  of  the  many  cases  of  discrimi- 
nation, extortion,  etc.,  decided  by  the  Interstate  Commerce  Com- 
mission, where  the  railroads  complained  of  having  ceased  their 
unlawful  practices  without  going  to  the  courts ;  but  the  limited 
character  of  this  article  forbids.  The  act,  in  a  measure,  protects 
the  roads  against  each  other. 

Many  men  engaged  in  business  on  a  limited  scale  have  found  in 
our  system  of  regulation  an  even  opportunity  to  do  business  with 
larger  and  richer  competitors,  and  small  towns  which  heretofore 
sought  to  encourage  the  establishment  of  manufacturing  industries 
in  their  midst  by  liberal  bonuses  of  land  and  money,  only  to  see 
them  driven  to  the  wall  by  favored  competitors,  a  further  distance 
from  the  market,  being  given  a  better  rate,  or  by  competitors  in 
a  neighboring  town  equi-distant  from  the  market  being  given  a 
rebate,  now  have  busy  factories  among  them,  and  prosperity  has 


44  THE  PUBLIC  AND  THE  RAILWAYS. 

come  to  their  people.  The  consumers  have  thus  been  benefited, 
and  the  gain  to  the  whole  country  cannot  be  measured  in  dollars. 

When  the  railroads  come  t'o  a  complete  realization  of  their  duties 
to  the  public,  and  recognize  the  further  fact  that  governmental  reg- 
ulation is  a  fixed  determination  of  the  people — as  I  believe  it  to 
be — the  advantages  of  such  regulation  will  be  greatly  increased ; 
and  with  a  more  cheerful  disposition  on  the  part  of  the  roads  to 
obey  the  strict  letter  and  spirit  of  the  law,  one  great  point  will 
have  been  gained  in  the  settlement  of  the  railroad  problem.  Law 
breaking  in  all  its  phases  will  continue  until  the  millennium ;  but 
when  governmental  regulation  shall  be  fully  recognized,  accepted 
and  obeyed,  it  will  mark  an  epoch  in  the  history  of  the  United 
States  which  cannot  be  regarded  but  with  gratification  by  all  law- 
abiding  citizens ;  and  such  obedience  to  law  will  place  the  railroad 
business  in  a  safer  and  better  position  in  every  way  than  it  has 
ever  before  occupied,  and  will  result  in  vast  good  to  all  the  people 
of  our  common  country. 

Springfield,  111. 


TME  RAILROADS  AND  THE  PUBLIC. 

By  Frank  J.  Firth. 

Under  this  borrowed  title,  it  is  proposed  to  consider  a  very  im- 
portant, often  discussed,  but  not  yet  exhausted  question. 

The  Railroads  and  the  Public!  The  title  appears  to  be  pecu- 
liarly appropriate  as  an  introduction  to  the  present  article.  It 
permits  us  to  consider  the  railroads  in  a  physical  way,  consisting 
of  roadway,  rails,  depots  and  equipment.  Monuments  of  a  paCSt  ex- 
penditure of  brain  and  capital,  but  dormant,  needing  something 
to  vitalize  them.  They  stand  as  an  unused  turnpike  road  may 
stand  with  its  gates  open,  no  vehicles  in  motion  upon  it,  of  no  pub- 
lic service. 

The  object  in  asking  that  the  railroads  be,  for  the  moment,  con- 
sidered in  this  dormant  state,  is  that  "the  public  "  may  be  made, 
for  once,  to  include  all  its  properly  constituent  parts.  '*  The  pub- 
lic "  is  a  sort  of  will-o'-the-wisp.  It  is  never  present.  It  is  almost 
incapable  of  definition,  as  it  is  popularly  conceived.  It  matters 
not  how  large  may  be  an  assembly,  the  public  is  always  conceived, 
in  a  vague  sort  of  way,  to  represent  those  who  are  absent.  The 
politician  declaims  about  his  duty  to  the  public  and  the  public  be- 
ing accepted  as  meaning  the  absent  and  unheard  from  members 
of  the  body  public,  is  but  a  shadowy  sort  of  task  master.  It  is 
time  to  call  a  halt  on  this  wrong  use  of  the  term  "the  public"  and 
to  demand  that  the  fact  be  clearly  and  at  all  times  recognized  that 
"the  public"  in  the  United  States  of  America  consists  of  every 
member  of  its  population  in  any  way  interested  in  any  public 
question  that  is  to  be  considered. 

We  therefore  have  the  dormant  railroads  on  the  one  side  and  all 
of  the  people  of  the  United  States  upon  the  other;  and  what  are 
the  proper  relations  of  the  one  to  the  other;  what  is  necessary  or 
desirable  action  to  be  taken  by  those  members  of  the  public  body 
who  have  been  selected  from  its  number  to  act  as  legislators  in 
the  interest  of  all? 

It  is  believed  that  more  equitable  conclusions  will  be  arrived  at 
if  we  thus  consider  our  question,  than  would  result  if  we  consid- 
ered it  under  the  conditions  that  attach  to  the  railways  in  motion, 
as  we  then  find  one  section  of  the  public  arrayed  in  seeming  oppo- 
sition to  another,  and  we  of  necessity  side  with  one  party  or  the 
other. 

Reprinted  by  permission  from  the  Railway  Review  of  January  23,  1892. 


46   ,       THE  RAILROADS  AND  THE  PUBLIC. 

The  dormant  railroads  exist  as  monuments  of  a  past  expendi- 
ture of  brain  and  capital.  They  have  been  made  possible  by- 
legislative  acts.  The  early  railroad  legislation  was  no  doubt, 
much  of  it,  faulty,  lacking  in  intelligence,  corrupt;  it  no  doubt 
granted  large  powers  to  the  corporations  created  to  provide  the 
capital  to  construct  and  operate  the  railroads ;  land  grants,  immu- 
nity from  taxation  and  other  special  privileges  were  freely  given. 
Restrictions  as  to  charges  that  might  be  made  for  service  were 
uncommon. 

While  these  are  all  facts,  it  is  not  believed  that  any  of  this  class 
of  legislation  with  all  its  sins  of  omission  and  commission  can  be 
justly  held  responsible  for  the  present  difficulties  that  are  pre- 
sented by  the  railway  problem.  The  railroads  could  not  have 
been  called  into  existence  at  all  except  under  grants  of  the  right 
of  eminent  domain  and  of  an  aggregation  of  capital  under  condi- 
tions of  limited  liability.  This  much  must  be  granted  by  the  most 
intelligent  and  pure  legislation.  Freedom  from  taxation,  grants 
of  land,  etc.,  may  enrich  the  corporations  and  operate  inequitably 
in  many  ways,  but  they  are  not  the  conditions  responsible  for  the 
relation  of  the  railroads  to  "the  public,"  so  called,  that  occupies 
such  widespread  attention,  and  that  is  thought  to  demand  reme- 
dial legislation. 

It  is  a  fact  that  the  early  legislators  often  omitted  to  exercise  a 
rate  limitation  control,  but  this  is  not  thought  to  be  an  omission  of 
great  present  importance.  No  set  of  rate  limits  inserted  in  any  of 
the  older  charters  operate  as  any  restraint  upon  the  railroads  of 
to-day.  The  immense  and  continuing  increase  in  the  volume  of 
the  carrying  business ;  improved  and  economical  methods,  result- 
ing from  the  natural  ingenuity  of  our  people,  stimulated  by  the 
necessities  of  a  competition  unmatched  in  any  other  business  or  in 
any  other  part  of  the  world,  have  led  the  carriers  to  voluntarily 
adopt  rates  for  their  service  that  no  sane  legislator  would  have 
dreampt,  a  few  years  since,  of  exacting  by  law. 

Whatever  inequities  have  existed,  or  may  still  exist  in  the  treat- 
ment of  "the  public"  by  the  railroad  corporations,  will  be  found 
to  be  the  result  of  honest  or  dishonest  selfishness  on  the  part  of 
individual  railroad  managers,  a  selfishness  made  powerful  for 
harm  by  a  practically  unrestrained  control  of  capital  and  patron- 
age. By  honest  selfishness  is  meant  effort  intended  to  be  in  the 
interest  of  the  corporation.  By  dishonest  selfishness  is  meant  ef- 
fort in  the  private  interest  of  the  individual  manager,  regardless 
of  his  corporate  obligations. 

Selfishness,  often  unintelligent  selfishness,  is  not  peculiar  to  the 
railroad  business,  and  it  might  as  well  be  recognized  that  the 
operating  of  railroads  is  a  business,  and  is  carried  on  with  the 
same  end  in  view  that  any  man  or  body  of  men  seek  in  conducting 
any  other  business.  There  may  be  a  peculiar  duty  owing  by  the 
railway  corporations  to  the  people,  but  notwithstanding  this  the 


THE  RAILROADS  AND  THE  PUBLIC.  47 

carrying  service  is  and  must  be  conducted  mainly  with  the  idea  of 
securing  a  business  profit  from  its  operations.  AH  of  the  methods 
that  are  found  necessary  to  obtain  a  profit  from  other  business  opera- 
tions conducted  upon  a  large  scale  and  under  competitive  condi- 
tions, will  be  found  necessary  in  the  railway  service.  The  railway 
management  of  the  country  controls  no  short  road  to  success,  and 
has  no  patented  processes  that  ensure  its  receipts  exceeding  its 
expenditures. 

Let  us  return  to  the  dormant  railroads  and  the  public  and  con- 
sider the  action  that  our  legislators  should  take  in  our  interest. 
It  is  clear  that  these  railroads  to  be  useful  must  be  operated.  To 
bring  about  this  result  brain  and  capital  must  be  applied  to  them. 
The  first  duty  of  legislation  is  to  afford  a  proper  protection  to  the 
brain  and  to  the  capital  that  are  to  be  induced  to  undertake  this 
important  work.  The  capitalist  who  may  step  forward  from  the 
ranks  of  the  public  and  undertake  to  serve  its  remaining  mem- 
bers is  entitled  to  a  fair  opportunity  to  benefit  from  his  voluntary 
action.  He  is  entitled  to  protection  for  his  property  and  to  an 
assurance  that  the  necessary  distribution  of  competitive  traffic, 
and  of  its  resulting  revenues,  shall  be  made  between  parties  inter- 
ested in  the  simplest  possible  way  and  the  one  that  involves  the 
least  needless  waste  of  revenue.  If  capitalists  deem  it  to  their 
advantage  to  adopt  pooling  methods,  so  called,  in  distributing 
their  traffic  receipts  they  should  be  permitted  to  use  these 
methods,  subject  always  to  the  right  of  the  public  to  protect  itself 
against  any  possible  monopolistic  results.  Distribution  is  a  neces- 
sity, and  unintelligent  distribution  works  a  public  calamity.  In 
the  interest  of  capitalist  and  the  public,  equally,  the  legislation 
proposed  should  protect  and  prevent  the  creation  of  unnecessary 
carrying  facilities.  A  needless  duplication  of  carrying  facilities 
lessens  the  volume  of  traffic  obtainable  by  each,  and  the  smaller 
the  volume  of  traffic  the  greater  the  cost  of  performing  the  ser- 
vice. The  public  must,  in  the  end,  pay  the  cost  of  the  carrying 
service.  It  is  clearly  to  the  interest  of  the  public  to  confine  the 
traffic  to  as  few  lines  as  can  satisfactorily  care  for  it,  and  thus 
secure  the  low-priced  service  that  is  made  possible  by  a  large  vol- 
ume of  business. 

Having  obtained  the  capital  needed  to  vitalize  the  dormant  rail- 
roads, and  drawn  upon  a  share  of  the  public  to  supply  it,  there  is 
now  a  need  to  employ  this  capital  in  hiring  the  brain  and  sinew  to 
place  the  vitalized  body  in  active,  wholesome  motion.  Here  we 
draw  again  upon  the  public,  and  in  doing  so  we  must  consider  the 
legislative  protection  to  which  this  share  of  the  public  is  entitled. 
The  brain  and  sinew  devoting  itself  to  railroad  operation  is  the 
peer  of  that  found  in  any  other  occupation  in  the  land.  It  is  as 
much  entitled  to  legislative  protection.  It  represents  millions  of 
industrious  men  and  women,  all  of  them  workers  in  the  true  sense 
of  the  word,  none  of  them  drones  in  the  hive.     To  them  we  un- 


48  THE  RAILROADS  AND  THE  PUBLIC. 

hesitatingly  commit  our  property  and  onr  lives,  and  our  confidence 
is  rarely  abused.  The  brain  and  sinew  operating  the  railroads  of 
the  country  are  full  partners  with  the  capitalist  in  the  results  of 
these  operations ;  in  fact,  they  are  special  or  preferred  partners. 
They  must  receive  their  share  of  the  results  of  the  business  before 
anything  can  go  to  the  capitalist.  They  are  deeply  interested  in 
having  their  chosen  legislators  enact  laws  that  may  permit  such  a 
distribution  of  railway  earnings  as  will  prevent  wasting  rate  wars, 
from  which  they,  the  laborers,  suffer.  The  railway  laborers  of 
the  country  may  well  demand  legislative  protection  from  the  per- 
nicious effects  of  that  unrestrained  competition  which  is  popularly, 
but  ignorantly,  believed  to  be  the  life  of  trade.  The  needless 
duplication  of  carrying  facilities  and  the  unintelligent  distribution 
of  competitive  carrying  results  are  made  at  the  expense  of  the 
laborer  on  the  railway  lines,  whether  it  is  a  labor  of  brain  or 
of  sinew.  Rate  wars  waste  the  carriers'  revenues  and  force  re- 
ductions in  the  numbers  of  employes  and  in  the  wages  of  those 
who  are  retained.  The  wage  earners  suffer  from  an  evil  that  leg- 
islation should  eradicate.  Intelligent  distribution,  which  in  its 
present  state  of  advancement  is  represented  by  pooling,  so  called, 
should  not  only  be  authorized,  but  it  should,  perhaps,  be  enforced 
by  legislation.  •  It  is  marvellous  that  organized  labor  has  not  ap- 
preciated its  vital  interest  in  this  question  of  rate  wars,  and  in- 
sisted, with  all  its  united  power,  upon  equitable  legislative  pro- 
tection against  the  consequences  of  wasteful  railway  management. 
If  a  tithe  of  the  time  and  money  wasted  by  organized  railway 
labor  in  "  striking"  against  wage  reductions  had  been  devoted  to 
demanding  legislative  protection  against  the  ignorant  and  fre- 
quently unlawful  competition  between  carriers  that  has  reduced, 
revenues  and  forced  the  wage  reduction,  much  more  of  practical 
benefit  would  have  been  realized  by  organized  labor.  In  all  of 
the  legislation  for  the  regulation  of  the  carrying  business  of  this 
country  there  is  yet  to  be  seen  anything  that  considers  in  the  re- 
motest degree  the  wage  interests  of  that  vast  class  of  the  public 
employed  in  carrying  on  the  railroad  service. 

We  have  now  drawn  from  the  public  the  railway  capitalist  class 
and  their  vast  army  of  employes.  Let  us  consider  another  por- 
tion of  the  public  in  its  relation  to  the  railways.  Every  man  or 
woman  carrying  on  or  interested  in  any  occupation  connected 
with  the  supplying  of  material  to  the  railways  to  be  used  in  their 
business  operations  and  every  man  or  woman  similarly  supplying 
material  or  service  to  anyone  in  the  employ  of  the  railways,  may 
be  embraced  in  the  class  of  the  public  it  is  now  proposed  to  con- 
sider. 

This  class,  or  some  of  them,  may  occupy  another  relation  to  the 
railway  question,  that  of  passengers  or  shippers  or  receivers  of 
freight  on  the  railroads,  but  these  relations  will  be  considered 
later.     As  supplying  service  or  material  this  class  has  a  vital  inter- 


THE  RAILROADS  AND  THE  PUBLIC.  ^g 

est  in  preventing  the  waste  of  railway  revenues.  Poor  railways 
are  poor  buyers.  They  are  also,  as  has  been  before  said,  poor 
payers  of  their  employes,  and  this  makes  the  employes  of  neces- 
sity poor  buyers  of  material  and  service.  The  supplying-  class  is, 
therefore,  as  much  interested  as  the  railway  wage  earners  in  de- 
manding legislation  that  shall  protect  them  against  the  needless 
waste  of  carrving  revenues.  The  railroads  of  the  country  consti- 
tute a  vast  clearing  house.  The  one  thousand  millions  of  annual 
revenue  they  collect  is  all  disbursed  among  the  people.  It  is  not 
hoarded.  Something  over  ten  per  cent  of  this  vast  revenue  is  all 
that  goes  to  the  railway  shareholders  as  a  return  for  their  capital. 
From  the  remaining  ninety  per  cent  the  wage  earners  are  paid 
the  money  with  which  they  purchase  the  service  and  material  used 
by  themselves  and  their  families ;  the  factories  are  paid  for  all  of 
the  great  variety  of  material  that  enters  into  the  daily  repair  and 
operations  of  the  railroads.  Prosperity  for  the  railway  means 
prosperity  for  the  country.  When  the  railways  are  liberal  buyers 
and  wage  payers  the  farmer,  miner  and  manufacturer  are  alike 
benefitted 

Again  let  us  return  to  the  public  and  see  what  class  or  classes 
we  have  left  demanding  our  consideration. 

The  producers  of  the  country,  whether  farmers,  miners  or  man- 
ufacturers, constitute  a  very  large  and  important  class  and  in  their 
relation  to  this  question,  as  passengers  on  the  railroads  or  shippers 
or  receivers  of  freight  carried  upon  these  roads,  they  are  entitled 
to  legislative  protection.  The  protection  they  may  naturally  de- 
mand is  in  safety  of  service,  and  reasonable  charges  that  do  not 
unfairly  discriminate  between  persons  or  places.  This  class  is  as 
greatly  interested  as  any  of  the  others  in  demanding  that  there 
shall  be  no  needless  duplication  of  carrying  facilities  with  its  at- 
tendant lessening  of  the  volume  of  trafific  on  each  line  and  in- 
crease in  the  cost  of  the  service.  This  class  is  also  entitled  to  de- 
mand uniform  and  stable  rates  of  freight,  and  freedom  from  rate 
wars,  whether  such  wars  result  from  dishonesty  or  inefficiency  in 
railway  management. 

The  public  may  be  further  differentiated  but  there  is  neither 
time  nor  space  now  available  for  the  work  and  it  is  perhaps  un- 
necessary for  the  purposes  of  this  article.  All  of  the  bankers, 
brokers  and  middle  men,  constituting  as  they  do  an  important 
and  aggressive  class,  should  perhaps  be  considered  as  a  portion  of 
the  producer  or  consumer  class.  They  stand  between  the  pro- 
ducer and  the  consumer  and  their  interest  in  the  railway  problem, 
important  as  it  is,  appears  to  be  an  interest  in  which  they  properly 
represent  the  producing  or  consuming  class. 

When  the  public  is  spoken  of  in  its  relation  to  the  necessity  for 
remedial  railway  legislation  let  it  be  understood  that  in  the  United 
States  of  America  the  public  consists  of  all  of  the  men  and  women 
who  constitute  its  population,  and  that  the  legislators  chosen  to 

4 


50  THE  RAILROADS  AND  THE  PUBLIC. 

represent  them  all  must  be  required  to  equally  regard  all  of  their 
respective  interests. 

Legislation  on  this  important  question  should  be  thoughtfully- 
worked  out  by  the  best  minds  in  the  country  acting  with  absolute 
freedom  from  prejudice.  That  some  legislation  is  necessary  and 
right  is  a  fact  beyond  dispute.  It  is  a  further  and  equally  appar- 
ent fact  that  this  necessary  and  right  legislation  is  not  yet  to  be 
found  in  any  of  the  existing  statutes  either  state  or  national. 

Philadelphia,  January  i8,  1892. 


THE  rUTURE  Or  THE  RAILROAD  PROBLEM. 

Bf  A.  B.  Stickney, 

Chairman  of  the  Board  of  Directors  of  the  Chicago,  St.  Paul  and  Kansas  City  Railway. 

You  have  invited  me  to  speak  on  "  The  Future  of  the  Railway- 
Problem."  There  seems  to  be  an  Evil  Genius  besetting  and  con- 
trolling this  problem.  This  malign  spirit  has  two  names  and  two 
faces.  When  the  people  hear  one  of  its  names  and  look  upon  one 
of  its  faces  they  are  filled  with  admiration  and  love,  and  cannot 
believe  or  understand  that  it  is  the  same  evil  spirit  which  under 
its  other  name  they  so  thoroughly  detest,  and  whose  other  face  is 
so  hideous. 

The  beloved  name  of  this  uncanny  existence  is  ''Competition  in 
Railway  Rates."  Its  detested  name  is  ''Discrimination  in  Rail- 
way Rates." 

In  my  judgment  the  future  of  the  Railway  problem  depends 
upon  the  fate  of  this  Demon. 

"Competition  in  trade "  is  a  phrase  which  has  a  peculiar  charm 
in  the  ears  of  a  commercial  people.  It  implies  freedom  of  thought 
and  action  and  a  fair  chance.  For  generations  the  children  at 
school  have  been  taught  that  "competition  is  the  life  of  trade;" 
and  so  it  is,  as  between  individuals  on  approximately  the  same 
footing.  It  sharpens  the  wits,  awakens  inventive  genius,  and 
stimulates  good  manners.  But  that  competition  which  is  "the 
life  of  trade  "  can  only  exist  between  parties  occupying  substan- 
tially the  same  plane.  It  cannot  exist  between  "  Big  Fish  "  and 
"  Little  Fish  "  in  the  same  pool.  The  little  fish  musf  keep  close 
to  shore,  be  contented  with  what  the  the  big  fish  don't  want,  or 
be  swallowed. 

The  practice  of  railway  companies  of  making  unreasonably  low 
rates  from  important  junction  points,  while  maintaining  high  rates 
elsewhere,  has  been  improperly  named  "  competition, "  and  the 
name  has  given  it  a  certain  amount  of  popularity.  But,  in  fact, 
it  has  not  been  competition  but  "discrimination."  Discrimina- 
tion, instead  of  being  "the  life  of  trade,"  is  the  death  of  that  fair 
competition  as  between  individuals  and  localities,  which  so  long 
and  justly  has  been  styled  "  the  life  of  trade. "  The  city  in  whose 
favor  discrimination  is  practiced  becomes  the  "big  fish  "  and  at 

Reprinted  by  permission  of  the  Northwestern  Railroader,  November  9,  1890. 


52  THE  FUTURE  OF  THE  RAILROAD  PROBLEM. 

once  begins  the  process  of  "  swallowing  "  the  trade  and  population 
of  its  -unfortunate  neighboring  cities ;  and  the  individual  trades- 
man who  receives  rebates  quickly  devours  those  who  do  not. 

It  is  as  though  the  Government  should  make  rebates  from  its 
tariffs  to  some  importing  houses  which  it  refused  to  make  to 
others.  It  would  be  absurd  to  suppose  that  as  between  such 
favored  houses  and  houses  not  so  favored  there  could  be  any  com- 
petition. If  houses  which  paid  the  full  tariff  continued  to  exist  it 
would  be  by  permission  of  the  favorites.  Their  existence  would 
be  by  grace,  not  by  good  works. 

To  judge  correctly  of  the  effect  of  railway  discrimination  re- 
quires the  possession  of  certain  commercial  information.  For  ex- 
ample, it  should  be  known  that  when  corn  is  worth  25  cents  a 
bushel  in  the  Chicago  market,  at  the  railway  station  west  of  the 
Missouri  River  it  would  be  worth  from  12  to  15  cents;  the  differ- 
ence between  its  value  in  the  Far  West  and  in  Chicago  being 
made  up  of  cost  of  transportation,  and  the  expenses  of  buying  and 
selling,  and  a  profit  to  the  middle  man.  A  clean  profit  over  all 
out-of-pocket  expenses  of  one-half  of  one  cent  a  bushel  is  a  satis- 
factory profit  to  the  middle  man,  and  a  sure  guaranteed  rate  of 
transportation  of  even  so  small  a  sum  as  one- quarter  of  a  cent  a 
bushel  less  than  any  other  middle  man  can  get,  will  give  the  man 
possessing  it  the  monopoly  of  the  business  of  handling  the  corn  in 
the  district  covered  by  the  guarantee.  That  is  to  say,  if  it  were 
possible  to  give  one  middle  man ,  the  absolute,  permanent  advan- 
tage in  respect  to  rates  over  all  others  in  this  business  to  the  ex- 
tent of  one-quarter  of  one  cent  a  bushel,  it  would  be  a  weapon  of 
warfare  sufficiently  powerful,  under  present  commercial  condi- 
tions, to  drive  every  other  middle  man  out  of  the  field  and  to  se- 
cure to  the  fortunate  individual  the  whole  com  traffic.  Why? 
Because  a  clean  profit  of  one-quarter  of  a  cent  per  bushel  would 
be  sufficient  to  pay  an  enormous  interest  on  the  necessary  capital, 
while  it  is  evident  that,  if  he  contented  himself  with  that  profit, 
no  other  man  could  get  any  profit  at  all. 

Such  are  the  facilities  of  trade  by  means  of  bills  of  lading, 
drafts,  telegraph,  banks,  &c.,  that  to  do  an  enormous  corn  trade 
the  middle  man  requires  only  a  comparatively  small  capital  to  use 
as  a  margin.  A  capital  of  fifty  thousand  dollars  is  ample  to  thus 
handle,  say,  15,000,000  bushels,  and,  with  activity,  double  that 
amount,  per  annum.  One-quarter  of  a  cent  a  bushel  profit  on 
15,000,000  bushels  would  amount  to  $37,500 — equal  to  75 /^r  cent 
per  an7ium  on  the  capital  employed.  As  a  matter  of  fact,  such 
discrimination  to  the  extent  of  one- thirty-second  of  a  cent  a 
bushel  in  the  hands  of  a  Rockefeller  would  accumulate  in  a  short 
time  the  wealth  of  a  Vanderbilt,  because  it  would  create  a  mo- 
nopoly ;  and  after  all  other  buyers  were  driven  out  of  the  field,  he 
might  not  be  contented  with  one-thirty-second.  He  would  then 
have  the  power  to  exact  more.     So  in  the  coal  trade,  15  cents  per 


THE  FUTURE  OF  THE  RAILROAD  PROBLEM.  53 

ton  is  a  satisfactory  miner's  profit,  and  an  absolutely  sure,  per- 
manently guaranteed  discrimination  in  rates  of  5  cents  a  ton 
would  be  sufficient,  in  the  hands  of  a  competent  man,  to  create 
a  monopoly  and  drive  all  other  miners  out  of  the  business. 

A  like  profit,  from  the  same  source,  of  5  cents  a  barrel  on  flour 
would  pay  the  shareholders  of  the  great  milling  corporation  at 
Minneapolis  satisfactory  dividends  and  give  it  a  monopoly,  if  it 
cared  to  increase  its  plant  sufficiently. 

With  these  facts  fresh  in  mind,  who  is  willing  to  say  that  the 
power  to  discriminate  in  freight  rates  ought  to  be  lodged  in  the 
absolute  control  of  one  man  or  of  a  few  men?  Under  such  con- 
ditions what  business  is  safe?  The  average  business  man  feels 
strong  enough  to  cope  with  his  competitors  on  equal  terms,  but 
here  is  a  power  against  which  it  is  useless  to  contend,  but  which 
cannot  be  evaded.  This  power,  like  a  Government,  has  authority 
to  make  a  tariff  and  enforce  its  collection.  It  claims  a  right 
which  no  civilized  government  claims,  and  no  sovereign  has  dared 
to  exercise  for  centuries,  of  rebating  a  portion  of  its  tariff,  and 
thus  discriminating  between  its  subjects  in  the  collection  of  reve- 
nues. It  is  safe  to  say  that  if  the  Congress  of  the  United  States 
should  enact  a  law  which  established,  on  any  commodity,  one  im- 
port duty  for  the  city  of  New  York,  and  a  different  duty  for  other 
cities,  or  one  duty  for  one  firm  and  another  duty  for  another  firm, 
no  matter  how  slight  the  difference,  the  people  would  resort  to 
arms,  if  need  be,  rather  than  submit. 

Railway  transportation,  under  present  conditions,  is  to  the  in- 
dustrial world  what  the  atmosphere  is  to  the  physical  world.  It 
pervades  and  is  essential  to  all  industries.  As  in  the  physical 
world  no  man,  nor  beast — no  plant,  nor  shrub,  nor  weed — can 
refuse  to  breathe  the  air,  without  death  ensuing,  so  in  the  indus- 
trial world  no  branch  of  business  can  refuse  railway  transporta- 
tion except  under  like  penalties.  It  pervades  every  article  of 
commerce.  When  one  buys  food,  clothing  or  fuel,  he  buys  rail- 
way transportation.  When  he  builds  houses  or  stores  or  manu- 
facturing establishments,  churches  or  school  houses,  he  buys  rail- 
way transportation.  When  he  buys  horses,  carriages,  jewels  or 
statuary,  paintings  or  books,  theatre  or  lecture  tickets,  or  indulges 
in  the  luxury  of  doctors  or  lawyers,  he  pays  for  railway  transpor- 
tation. 

Who  would  consent  that  a  few  men  should  have  the  power  to 
dictate  upon  what  terms  the  air  should  be  breathed?  It  is  idle  to 
talk  about  railway  transportation  being  a  mere  article  of  commerce 
owned  by  the  company,  "  which,  as  such  owner,  may  sell  it  or  not 
as  it  may  see  fit,  or  if  it  elects  to  sell,  mky  demand  such  price  as 
it  chooses  or  can  obtain."  It  is  nonsense  to  call  that  "merchan- 
dise," which  no  one  can  refuse  to  purchase. 

Looking  at  the  subject  from  the  standpoint  of  the  owner  of  rail- 
way property,  this  absolute  power  in  the  hands  of  managers,  who 


54  THE  FUTURE  OF  THE  RAILROAD  PROBLEM. 

after  all  are  but  human,  with  limited  knowledge  and  capacity, 
seems  quite  as  dangerous  to  that  interest  as  to  the  interests  of  the 
people.  It  is  evident  that  in  order  to  keep  railways  running,  suf- 
ficient revenue  must  be  collected  to  pay  operating  expenses ;  and 
fairness  requires  an  additional  amount  as  compensation  for  the 
VL  se  of  the  capital  invested.  So  large  is  the  tonnage  that  a  slight 
change  in  the  average  rate  a  ton  a  .mile  makes  the  difference  be- 
tween a  profit  and  a  loss,  and  the  whole  revenue  is  made  up  of  an 
almost  infinite  number  of  comparatively  trifling  individual  collec- 
tions. An  average  difference  of  one-tenth  of  one  cent  a  ton  a  mile 
on  the  tonnage  of  the  Chicago  &  Northwestern  Railway  in  1888 
would  have  made  a  difference  in  its  aggregate  revenues  of  $1,939, - 
044  10,  a  sum  more  than  sufficient  to  pay  a  six/^r  cent  dividend 
on  its  common  stock. 

A  mill  a  ton  a  mile  is  about  equal  to  two  cents  a  hundred-weight 
between  St.  Paul  and  Chicago.  These  figures  show  how  delicately 
a  tariff  must  be  adjusted  to  produce  the  proper  revenue,  and  how 
slight  a  variation  may  result  in  wiping  out  the  dividends  for  a 
year. 

And  yet,  upon  each  road,  one  man  with  autocratic  power,  and 
his  many  subordinates — acting  separately,  without  consultation — 
are  making  rates  varying:  in  amounts,  from  day  to  day,  and  as  be- 
tween different  men  and  different  localities ;  without  rule  or  prin- 
ciple as  a  basis,  simply  guessing  in  each  individual  case,  with  the 
expectation  that  the  average  of  their  guesses  for  a  year  will  come 
within  the  fraction  of  a  mill  per  ton  per  mile  of  the  proper  amount. 

This  appears  to  be  the  present  basis  of  the  value  of  railway 
property.  If  the  people  need  a  fixed  rule  or  law  establishing  rates, 
the  companies  need  it  even  more.  If  there  should  be  vouchsafed 
to  the  American  people  a  man  with  the  genius  to  produce  such  a 
rule,  which  shall  be  just  to  both  the  people  and  the  companies 
(for  no  other  can  become  effective),  the  future  of  this  great  prob- 
lem will  then  look  bright.  Every  citizen  will  then  have  a  fair 
chance.  That  fair  competition  between  persons  which  is  the 
*'  life  of  trade  "  will  again  be  possible.  Individual  enterprise  and 
judgment  and  genius  will  again  have  scope.  And  that  prosperity 
which  always  goes  hand  in  hand  with  the  privilege  for  every  man 
to  look  out  for  himself,  will  follow. 

If,  on  the  other  hand,  paternalism  in  railway  management  is  to 
continue  and  increase,  if  these  companies  keep  on  discriminating 
in  favor  of  certain  towns  and  business  houses,  all  the  business  of 
the  country  Sooner  or  later  will  fall  into  the  hands  of  the  few. 
Later  on  discrimination,  as  between  these  few,  will  reduce  their 
numbers,  and  so  on,  till  finally  the  prospect  would  seem  to  be  that 
in  addition  to  the  Standard  Oil  Company,  which  we  already  have, 
there  might  be  one  Standard  Mercantile  Company,  one  Standard 
Manufacturing  Company,  one  Standard  Railway  Company,  four 
Presidents,  four  General  Managers,  a  score  of  Directors,  and  the  rest 


THE  FUTURE  OF  THE  RAILROAD  PROBLEM.  55 

of  the  then  probable  population  of  1 00, 000, 000  of  people  will  be  poor 
grangers,  clerks  and  employes,  all  mere  "strikers  "  and  impotent 
"kickers,"  living,  packed  like  sardines,  in  enormous  tenement 
houses  at  "  competitive  points,"  sucking  their  daily  food  through 
one  of  Bellamy's  tubes,  from  the  common  pot  in  the  company's 
perennial  soup  house,  until  the  "boss  "  chooses  to  turn  the  valve 
on  them.     O  happy  day! 

Then  those  who  are  not  Presidents  or  General  Managers  or 
Directors  will  be  like  the  two  urchins  who  were  only  stockholders 
in  a  Joint  Stock  Company  consisting  of  three,  who  had  each  con- 
tributed a  cent  towards  its  capital,  which  was  invested  in  a  cigar 
which  the  President  smoked.  As  the  little  fellows  saw  the  cigar 
disappearing  they  began  to  clamor  for  their  turn.  The  larger 
boy,  who  was  President,  exclaimed  that  in  all  corporations  it  was 
the  proper  thing  for  the  President  to  smoke  the  cigars.  But  said 
the  boys,  "  Where  do  we  come  in?  "  "  Well,"  said  the  President, 
deliberating,  ' '  let  me  see,  you  are  only  stockholders,  I  suppose 
you  may  be  allowed  to  spit." 

Let  us  hope  that  in  that  "sweet  bye  and  bye"  the  common 
people  may  be  allowed  to  spit. 

Of  course,  gentlemen,  I  do  not  wish  to  be  understood  as  even 
indirectly  implying  that  I  apprehend  such  a  future.  I  fully  be- 
lieve that  the  time  will  come  when  the  evils  of  discrimination  in 
railway  rates  will  be  done  away  with.  I  fully  believe  that  the 
time  will  come  when  these  rates  will  be  so  adjusted  that  the  peo- 
ple will  have  an  opportunity  to  compete  fairly  in  business  matters 
between  themselves  without  the  interference  of  railway  com- 
panies. Then  the  railways  will  be  free  to  compete  with  each 
other,  not  by  discrimination  in  rates,  but  by  exercising  the  inge- 
nuity of  their  managers  and  employes  in  discovering  and  putting 
into  effect  improved  methods,  which  shall  cheapen  the  cost  of 
transportation  and  improve  the  service  to  all  alike.  Then  the 
railways  will  become  in  fact  what  they  are  in  theory,  great  high- 
zuays  of  free  trade. 

Then  the  companies  will  devote  themselves  exclusively  and  im- 
partially to  transportation.  Then  there  will  be  no  attempted 
competition  between  an  individual  on  the  one  side  and  an  individ- 
ual with  a  railroad  corporation  combined  on  the  other,  nor  be- 
tween one  locality  on  the  one  side,  and  another  locality  with  one 
or  more  railways  combined  on  the  other  side ;  but  there  will  be 
actual,  fair  competition  between  individuals  alone,  and  actual, 
fair  competition  between  railways. 

But  let  the  people  and  the  companies  remember  that  "  cutting 
rates  "  in  favor  of  individuals  or  localities  is  not  competition  be- 
tween railways,  but  unjust  discrimination.  And  let  the  nomencla- 
ture of  railway  parlance  be  reformed.  Hereafter,  instead  of  "com- 
petitive rates,"  let  them  be  called  "  discriminative  rates,"  and  in- 
stead of  "competitive  points,"  let  them  be  called  "points  of  dis- 
crimination." 


56 


THE  FUTURE  OF  THE  RAILROAD  PROBLEM. 


And  let  the  people  and  the  companies  also  remember  that  ''dis- 
crimination "  prevents  "competition  "  and  tends  to  establish  mon- 
opolies in  the  hands  of  the  few. 

Lest  those  who  have  hitherto  prospered  by  discrimination 
should  be  prompted  by  selfishness  and  self-confidence  from  giving 
heed  to  the  lesson,  let  the  people  of  St  Paul  and  Minneapolis,  and 
Sioux  City  and  Omaha,  and  St.  Joseph  and  Kansas  City,  under- 
stand that  their  cities  are  now  becoming  what  the  cities  of  La- 
Crosse,  Dubuque,  Clinton,  Davenport  and  Burlington  became 
twenty  years  ago,  midway  stations  (instead  of  terminal  stations) 
on  great  through  lines  of  railways.  Let  them  remember  that  the 
latter  cities,  twenty  years  ago,  were  in  respect  to  commerce  and 
manufactories  as  important,  relatively^  as  are  now  the  former 
cities,  which  were  then  mere  frontier  trading  posts;  that  for 
twenty  years  these  Mississippi  River  towns,  through  the  influence 
of  the  malign  spirit  of  discrimination,  have  practically  stood  still 
in  point  of  commerce  and  population,  while  the  then  frontier 
trading  posts  have  grown  into  important  cities  of  national  reputa- 
tion. 

Let  the  people  of  these  cities  consider  what  assurances  they 
have  that  this  mischievous  spirit  will  continue  true  to  them. 

Has  it  a  soul,  has  it  love,  which  will  make  it  forego  the  "long 
haul? "  Or  will  it  for  the  next  twenty  years  be  playing  its  pranks 
in  favor  of  the  "long  haul"  to  the  terminal  cities,  as  it  has  done 
in  the  past? 

On  the  other  hand,  let  the  companies  remember  that  by  dis- 
crimination they  have  built  up  some  manufacturing  and  mercan- 
tile concerns  so  big  that  thej^  are  now  more  powerful  than  the 
companies  inasmuch  as  they  are  able  to  dictate  the  rates  that  they 
will  pay — that  monopolies  in  trade  are  as  dangerous  to  railways  as 
uncontrolled  monopolies  in  transportation  are  to  communities. 
And  let  all  remember  that  it  is  dangerous  to  "play  with  fire," 
and  that  no  business  can  be  permanently  properous  which  is  not 
founded  on  principles  of  justice. 


UNITY  or  RAILWAYS  AND  RAILWAY 
INTERESTS. 

By  the  Hon.  A.   ScJioonmaker . 

Ex-Member  of  the  Interstate  Commerce  Commission. 


(< 


Distinct  like  the  billows,  but  one  like  the  sea,"  is  a  figure  that 
applies  to  more  things  than  the  States  of  the  American  Union.  It 
applies  with  emphasis  to  the  railways  and  railway  interests  of  the 
country.  The  roads  are  distinct  entities  as  regards  their  corpor- 
ate existence,  their  ownership  of  property,  their  internal  manage- 
ment, their  capitalization,  and  in  some  other  respects.  But  as 
regards  their  public  uses  and  duties,  their  relations  toward  each 
other,  the  principles  that  should  govern  their  conduct,  the  busi- 
ness in  which  they  are  engaged,  the  methods  they  should  employ 
in  their  business,  and  the  conditions  of  usefulness  and  business 
success,  there  is  a  unity  that  admits  of  no  distinct  or  independent 
action. 

This  unity  is  the  groundwork  of  public  regulation  of  railways. 
Regulation  is  an  exercise  of  sovereign  power  through  general  laws 
and  administrative  agencies.  The  primary  object  of  regulation  is 
to  secure  fairness  and  impartiality  on  the  part  of  railways  to  the 
public ;  but  obviously  no  system  of  regulation  can  be  complete 
that  does  not  provide  for  fairness  and  impartiality  between  the 
roads  themselves. 

All  railroads  are  creatures  of  the  Government.  The  Govern- 
ment may  be  State,  Territorial  or  Federal.  They  come  into  ex- 
istence by  some  public  authority  exercised  in  some  sovereign  form. 
Theoretically,  at  least,  there  is  a  public  necessity  for  their  exis- 
tence, and  this  is  a  conclusive  presumption  in  their  favor.  They 
are  public  agencies  organized  and  operated  by  private  hands.  The 
State  thus  performs  its  duty  to  the  public  to  furnish  highways  of 
commerce  and  intercourse,  because  this  duty  can  be  better  done 
in  this  way  than  directly  by  the  State.  The  incentive  of  private 
interest  in  every  such  enterprise  is  added  to  the  public  duty  in- 
volved, and  advantages  of  economy,  efficiency  and  adaptation  to 
changing  conditions  secured,  that  are  never  attainable  under  the 
ponderous  machinery  of  governmental  action  with  its  endless  fric- 

Reprinted  by  permission  from  the  Independent  of  October  6,  1892. 


58  UNITY  OF  RAILWAYS  AND  RAILWAY  INTERESTS. 

tion  and  tardy  motion.  Economy  in  construction  and  manage- 
ment, superior  ability  in  the  service  generally,  direct  accounta- 
bility to  the  public  for  losses  and  injuries,  the  stimulus  of  com- 
petition among  roads,  the  avenues  opened  to  individual  enterprise 
and  employment  apart  from  dependence  on  Government,  are  some 
of  the  strong  reasons  for  private  ownership  and  operation  of  rail- 
ways. Probably  in  a  country  like  the  United  States,  where  every- 
thing involving  patronage  is  more  or  less  partisan,  there  could  be 
nothing  more  dangerous  or  eventually  disastrous  than  Government 
ownership  and  operation  of  some  ten  billions'  worth  of  railway 
property,  with  about  a  million  of  necessary  employes,  and  an  in- 
calculable amount  of  traffic  handled.  To  say  nothing  of  the  inca- 
pacity of  Government  for  so  huge  and  intricate  a  task,  the  political, 
financial  and  economical  perils  of  the  undertaking  should  forever 
forbid  its  assumption.  Government  supervision  to  secure  justice 
and  fairness  and  redress  for  wrongs,  is  as  far  as  governmental 
authority  can  safely  extend  or  ought  to  venture  in  meddling  with 
the  pursuits  of  citizens. 

The  inducement  to  private  citizens  for  the  construction  and 
operation  of  railways  is  the  profit  arising  or  expected  to  arise  from 
the  business,  and  this  is  legitmate.  If,  however,  the  profit  is  ex- 
pected to  accrue  from  manipulation  of  stock  and  bonds,  or  from 
forcing  some  competitor  to  purchase  the  property,  it  is  wholly  ille- 
gitimate, and  opens  up  a  field  where  governmental  authority  might 
very  properly  be  exercised  in  regulating  the  construction  of  new 
roads.  This  is  only  part  of  the  duty  Government  owes  to  exist- 
ing roads.  Every  new  road  of  considerable  importance  con- 
structed and  put  in  operation  is  a  disturbing  factor.  It  must  have 
business,  which  in  the  main  must  be  diverted  from  other  roads. 
It  competes  for  business,  generally  by  reducing  rates ;  and  just  to 
the  extent  that  it  acquires  business  other  roads  suffer.  And  they 
suffer  in  a  double  sense — loss  of  amount  of  business,  and  reduced 
charges  on  the  diminished  amount.  And  a  road  once  in  the  field 
is  there  to  stay.  It  cannot  be  put  to  another  use.  It  cannot  be 
abandoned,  for  that  is  a  total  loss.  The  old  law  maxim,  slightly 
changed  applies:  Once  a  railroad,  always  a  railroad.  It  is  then 
a  part  of  the  railway  system  of  the  country,  which,  for  business 
purposes,  for  its  uses  and  its  revenues,  and  for  the  rules  that  gov- 
ern its  business,  or  regulation,  is  a  unit. 

The  unity  of  railways  in  respect  of  their  mutual  obligations  and 
interests  is  fully  recognized  by  railway  managers.  No  railway 
manager  at  all  fit  for  his  post  considers  his  road  independent  of 
the  system  of  which  it  forms  a  part.  Cut  off  from  that  system  his 
road  would  be  practically  useless.  It  would  have  no  outlet  or  in- 
let. It  could  have  no  rates  beyond  its  own  line.  It  could  receive 
or  forward  no  traffic,  but  everything  would  be  local  on  its  own 
line.  It  could  meet  none  of  the  necessary  conditions  of  modern 
transportation  and  business  requirements.  It  would  be  an  iso- 
lated and  aggravating  nuisance. 


UNITY  OF  RAILWAYS  AND  RAILWAY  INTERESTS. 


59 


Every  road,  therefore,  owes  allegiance  to  the  entire  railway 
system.  It  is  part  of  it,  and  must  contribute  to  its  success  and 
usefulness.  It  must  interchange  and  receive  and  forward  cars  and 
traffic.  It  must  bill  goods  and  ticket  passengers  and  check  bag- 
gage over  other  roads.  It  must  have  suitable  connections  with 
other  roads,  both  as  to  times  and  places.  It  must,  in  short,  recog- 
nize the  fact  that  it  is  simply  an  integral  and  inseparable  part  of 
one  connected  system,  and  govern  itself  accordingly. 

The  unity  of  railways  applies,  in  the  first  instance,  to  their  phy- 
sical structure  and  the  connections  they  form  between  the  remot- 
est points.  The  expanse  of  continents,  the  channels  of  rivers  and 
mountain  elevations,  do  not  interrupt  these  physical  connections. 
Even  national  boundaries  and  foreign  jurisdictions  present  no  bar- 
riers, but  the  tracks  of  steel  penetrate  all  territorial  dominions, 
regardless  of  flags  or  forms  of  government,  and  unite  for  business 
purposes  the  most  diverse  peoples  and  countries.  Thus  the  Cana- 
das,  the  United  States  and  Mexico  form  one  theater  of  operations, 
with  a  prospect  of  an  early  extension  to  South  America. 

Other  conditions  of  unity  are  found  in  gauge  of  tracks,  the  char- 
acter of  the  motive  power,  the  passenger  and  freight  equipment, 
the  use  of  air  brakes  and  couplers  and  other  appliances.  These 
naturally  result  from  the  nature  of  the  business  and  the  conditions 
necessary  for  its  transaction.  A  business  that  ramifies  every- 
where, that  is  conducted  by  almost  numberless  distinct  but  co- 
operating agencies,  that  requires  both  dispatch  and  safety,  must 
have  substantial  unity  in  the  means  and  methods  by  which  it  is 
carried  on.  Every  separate  agency,  therefore,  finds  it  necessary 
to  conform  in  essentials  to  whatever  conditions  are  found  best  for 
the  successful  working  of  the  whole  connected  system.  For  ex- 
ample, only  a  few  years  ago  there  were  disparities  in  gauge.  Dif- 
ferent roads,  even  connecting  lines  forming  parts  of  one  proprie- 
tary or  operating  system,  had  a  difference  in  gauge,  involving 
vexatious  delays  and  no  small  expense  in  changing  trucks  for 
continuous  journeys.  Now,  under  the  compelling  force  of  the 
unwritten  laws  that  control  business  operations,  substantially  all 
important  roads  are  of  uniform  standard  gauge. 

The  unity  of  railways  also  applies  to  the  traffic  they  carry, 
whether  passengers  or  freight.  There  is  no  specialty  in  railroad 
carriage,  though  here  and  there  a  particular  commodity  like  coal, 
or  cotton,  or  lumber,  may  furnish  the  chief  freight  business;  but 
their  business  is  almost  universally  the  same,  and  includes  all 
varieties  of  freight,  and  all  passengers  offered.  The  traffic  seeks 
numberless  destinations,  and  moves  from  line  to  line,  and  from 
road  to  road,  over  main  lines  and  branches,  and  large  roads  and 
small  ones.  The  right  to  the  use  of  railways  for  transportation, 
both  of  persons  and  property,  is  mandatory,  and  cannot  be  refused. 
The  condition  of  railway  franchises  is  to  carry  whatever  transport- 
able traffic  is  offered.  And  in  this  respect  all  roads  are  alike.    They 


6o  UNITY  OF  RAILWAYS  AND  RAILWAY  INTERESTS. 

are  common  carriers,  and  can  apply  no  limitations  to  their  busi- 
ness, nor  upon  the  patrons  they  serve.  The  nature  of  the  traffic 
transported  being  the  same,  all  roads  have  a  common  interest  in 
whatever  relates  to  the  movement  of  the  traffic  and  the  recom- 
pense for  the  service. 

Another  element  of  unity  is  conspicuous  in  the  charges  of  service. 
In  no  respect  is  the  fact  more  distinct  or  the  compulsion  more  ar- 
bitrary than  in  the  matter  of  charges.  Competing  lines  must 
carry  at  substantially  the  same  rates.  There  may  be  slight  differ- 
entials, founded  on  length  of  haul,  conditions  of  route,  character 
of  road,  and  the  like ;  but  such  differentials  are  only  intended  to 
equalize  advantages  and  disadvantages,  and  to  place  competitors 
on  a  fairly  similar  basis.  This  rule  is  illustrated  all  over  the 
country,  wherever  there  are  groups  of  roads  carrying  between  the 
same  or  dependent  points.  The  trunk  lines  carrying  between 
Chicago  and  the  Northern  seaboard,  the  Northwest  lines  between 
Chicago  and  St.  Paul,  and  between  Chicago  and  Missouri  River 
points,  and  the  Transcontinental  lines,  are  all  examples  of  this 
law  of  uniformity  in  charges.  A  rate  made  by  one  line  on  a 
particular  traffic  must  be  the  rate  of  all  the  other  lines  in  order  to 
share  in  the  business.  This  is  also  illustrated,  in  another  \YSLy,  by 
the  effect  of  charges  for  water  carriage  upon  railway  rates.  For 
example,  water  carriage  of  grain,  flour,  lumber,  provisions  and 
other  articles  by  the  Great  Lakes  and  the  Erie  Canal,  forces  down 
the  railway  charges  in  direct  competition  with  the  water  route, 
and  these  again  depress  rates  on  other  rail  lines  all  over  the 
country.  Upon  the  article  of  sugar  carried  by  rail  from  San  Fran- 
cisco to  the  Missouri  River  the  rates  are  largely  influenced  by 
water  carriage  around  Cape  Horn  to  New  York  and  thence  by  rail 
to  the  same  destinations.  Then  again,  sugar  from  Louisiana 
must  be  carried  at  such  rates  as  will  enable  dealers  to  compete  in 
the  markets  at  the  points  mentioned.  Tea,  coffee  and  a  variety 
of  other  articles  might  furnish  similar  illustrations.  The  postulate 
is  that  there  can  be  no  independent  rates  upon  any  road  which  is 
part  of  the  general  railway  system,  and  inasmuch  as  there  is  no 
road  which  is  not  part  of  the  system,  all  rates  are  related  and  de- 
pendent, and  must  substantially  conform  to  one  another.  Rates 
and  revenues  are  not  synonymous.  Revenue,  of  course,  arises 
from  rates ;  but  the  same  rates  that  may  afford  net  revenue  to  one 
road  may  leave  a  deficiency  for  another.  More  expensive  opera- 
tion, want  of  judicious  economy  in  general  management,  larger 
fixed  charges  and  other  causes  may  exhaust  revenue  and  leave  no 
margin  of  profit.  Volume  of  business  alone,  as  in  the  case  of  the 
Pennsylvania  Railroad  or  the  New  York  and  New  Haven  road,  is 
the  most  important  factor  of  all.  The  fact  that  over  60  per  cent 
of  the  roads  in  this  country  pay  no  dividends  on  stock,  although 
carrying  at  proportionally  similar  rates,  is  evidence  that  rates 
alone  do  not  determine  the  profitableness  of  a  railroad. 


UNITY  OF  RAILWAYS  AND  RAILWAY  INTERESTS.  6i 

But  out  of  the  interdependency,  or,  in  other  words,  the  unity 
of  railways,  and  railway  interests,  arises  the  necessity  for  harmo- 
nious action  in  respect  to  all  their  common  duties  and  their  charges 
for  service.  The  prosperity  of  the  system  means,  in  a  degree, 
the  prosperity  of  all  roads  in  the  system.  Adversity  to  the  system 
affects  nearly  every  member  of  the  system  .  For  mutual  protec- 
tion, therefore,  and  to  prevent  general  disaster,  as  well  as  separate 
loss,  roads  enter  into  agreements  to  maintain  specified  rates,  and 
support  elaborate  and  expensive  associations  to  establish  rates, 
adjust  rate  questions,  and  protect  revenue  to  make  the  properties 
remunerative.  The  power  of  independent  rate  inaking  is  an  ab- 
stract corporate  power  of  every  road ;  but,  like  the  power  to  com- 
mit suicide,  it  can  only  be  exercised  for  self-destruction.  In  its 
consequences  it  is  worse,  and  works  destruction  to  others.  As  in 
the  social  body  absolute  liberty  exercised  by  any  individual  is 
chaos,  so  in  the  railway  world  the  liberty  of  a  road  to  act  as  it 
pleases,  in  disregard  of  the  rights  and  interests  of  others,  is  gen- 
eral ruin.  Society  is  only  made  endurable  when  liberty  is  regu- 
lated by  law.  The  restraints  of  law  upon  individual  liberty  are 
no  more  indispensable  to  society  at  large  than  to  the  whole  sub- 
ject of  railways,  their  construction,  their  use,  and  the  exercise  of 
their  corporate  powers.  The  common  welfare  always  demands 
certain  limitations  upon  individual  rights,  and  sometimes  their 
surrender.  It  is  only  in  this  way  that  public  order,  stability  and 
safety  can  be  assured.  Among  railways,  voluntary  association 
undoubtedly  is  of  considerable  value,  but  in  the  main  is  entirely 
inadequate ;  and  the  exercise  of  a  power  that  can  compel  respect 
for  the  rights  of  others,  enforce  fair  agreements,  afford  redress 
for  violations  of  mutual  duties  and  breaches  of  obligations,  is  es- 
sential. This  is  the  power  of  government — through  its  legislative 
and  judicial  branches — a  power  held  in  trust  only  for  the  public 
good. 

The  close  relationship  existing  between  railways,  and  the  far- 
reaching  consequences  of  independent  action  by  one  or  more  roads 
upon  all  others,  are  the  moving  causes  for  the  voluntary  associa- 
tions to  preserve  harmony  of  action  among  roads  and  guard  against 
the  evils  resulting  from  every  road  doing  as  it  pleases.  The  lack 
of  affirmative  legal  authority  for  such  associations,  the  bad  faith 
often  exhibited  by  some  of  their  members,  and  the  inability  either 
to  restrain  or  punish  delinquency,  have  operated  as  potent  causes 
in  another  tendency  which  has  grown  stronger  as  railroads  have 
increased  in  number  and  the  system  become  enlarged.  This  is  the 
tendency  toward  consolidation.  The  consolidation  in  some  form 
of  connecting  lines  to  form  extended  through  lines  has  gone  on 
from  nearly  the  earliest  period  of  railroads,  and  has  been  an  ob- 
vious necessity  of  transportation.  But  the  consolidation  of  lateral 
and  sometimes  parallel  or  divergent  lines  is  a  tendency  of  later 
date,  and  has  attained  extraordinary  development.     Such  great 


62  UNITY  OF  RAILWAYS  AND  RAILWAY  INTERESTS. 

systems  as  those  of  the  Pennsylvania  Company,  the  Union  Pacific, 
the  Southern  Pacific,  the  New  York  Central,  and  some  others,  are 
striking  illustrations  of  this  tendency.  The  New  York  Central 
system,  which  began  in  1853  by  the  consolidation  of  nine  small 
roads  between  Albany  and  Buffalo  and  Niagara,  with  about  four 
hundred  miles  of  road,  now  has  upward  of  2,270  miles  of  road  in 
New  York  State  alone,  traversing  the  State  in  all  directions,  and 
more  than  15,400  miles  of  affiliated  and  controlled  lines  in  the 
country  at  large,  equal  to  two-thirds  of  the  whole  railway  mileage 
of  England. 

The  same  argument  that  has  been  used  against  agreements  be- 
tween railroads  to  prevent  fluctuations  and  discriminations  in  rates 
has  been  urged  against  consolidation — namely,  that  it  may  deprive 
the  public  of  the  advantages  of  competition.  The  misleading  ar- 
gument, which  is  mostly  theoretical,  has  largely  lost  its  force  in 
the  light  of  actual  experience.  Scarcely  an  instance  can  be  named 
where  agreements,  respecting  rates  have  prejudiced  the  public, 
and  the  instances  are  very  rare  where  consolidations  have  harmed 
the  public.  On  the  other  hand,  the  benefits,  alike  to  the  railways 
and  the  public,  in  both  instances  generally  far  outweigh  any  ac- 
tual injuries.  To  the  railways  consolidation  secures  large  econo- 
mies and  stable  and  uniform  management ;  and  to  the  public,  far 
more  efficient  and  better,  and  often  cheaper,  service.  A  railroad 
must  derive  its  sustenance  from  the  public,  and  therefore,  must, 
as  far  as  practicable,  please  and  satisfy  the  public.  It  is  the  ser- 
vant of  the  public,  and  must  as  a  condition  of  its  employment 
render  an  acceptable  service. 

Under  the  supervisory  and  regulating  powers  of  Government, 
long  held  in  abeyance  but  at  present  vigorously  exercised  by 
Commissions  both  Federal  and  State  pursuant  to  laws  rather  ten- 
tative as  yet  but  likely  to  increase  in  vigor  and  efficiency,  there  is 
no  valid  reason  to  apprehend  any  serious  or  long- con  tinned  preju- 
dice to  the  public  either  from  rate  agreements  among  roads  or 
from  limited  consolidations.  Whenever  the  public  interests  are 
jeopardized,  correction  can  be  speedily  applied  by  commissions 
and  the  courts.  The  recent  action  of  the  Chancellor  of  New  Jer- 
sey in  respect  to  the  Reading  Railroad  leases  is  an  illustration  of 
the  potency  of  judicial  authority  in  such  cases.  It  may  be  that 
the  rights  of  coal  producers  and  of  rail  carriers  did  not  in  that  case 
receive  the  consideration  to  which  they  are  equitably  entitled. 
The  decision  rests  mainly  on  local  statute  law  forbidding  leases  to 
foreign  roads,  and  upon  a  theory  of  public  policy  in  favor  of  un- 
restricted and  unregulated  competition.  It  is  questionable,  how- 
ever, if  sound  public  policy  requires  any  business  to  be  carried  on 
at  a  loss.  For  example,  it  is  not  conducive  to  the  public  welfare 
that  coal  producers  shall  consume  the  entire  price  of  their  pro- 
duct in  cost  of  production  and  transportation,  nor  that  carriers 
shall  receive  no  remuneration  above  cost  of  carriage  to  them  for 


UNITY  OF  RAILWAYS  AND  RAILWAY  INTERESTS.  63 

their  service.     An  inquiry,  therefore,  into  these  features  of  such 
combinations,  underlies  the  question  of  public  policy. 

In  1823,  before  the  era  of  railroads,  DeWitt  Clinton,  to  whom  is 
due  the  glory  of  New  York's  commercial  supremacy  by  the  crea- 
tion of  its  most  potential  factor,  the  Erie  Canal,  condensed  a  vol- 
ume of  wisdom  in  a  single  sentence : 

"To  countenance  commerce  is  to  countenance  cheapness  of  transportation 
and  goodness  of  market ;  and  to  promote  the  wealth  of  any  member  or  section 
of  the  Union  is  to  enhance  its  ability  to  use  the  fabrics  and  to  consume  the 
products  of  the  others." 

One  of  the  profoundest  thinkers  of  this  country,  S.  J.  Tilden, 
twenty-five  years  ago,  in  an  address  delivered  in  the  Constitutional 
Convention  of  New  York,  used  the  following  language : 

"  I  do  not  think  there  is  any  just  ground  for  the  jealousy  which  appears  to 
be  felt  in  some  quarters  toward  the  railway  system  of  the  country.  It  cer- 
tainly has  served  the  public  with  great  efficiency  and  with  incalculable  utility. 
A  new  mode  of  intercommunication,  whereby  the  products  of  different  soils 
and  climates  and  capacities  of  supplying  human  wants  are  more  rapidly  or 
cheaply  interchanged,  adds  as  much  to  the  productiveness  of  human  industry 
as  increased  geniality  of  the  climate  or  increased  fertility  of  the  soil.  The  Con- 
vention of  1846,  by  provisions  which  it  fell  to  my  lot  to  report,  provided,  first, 
in  favor  of  a  system  of  incorporation  under  general  laws ;  and,  secondly,  for  a 
supervisory  legislative  control  over  the  chartered  powers  and  privileges  of  all 
corporate  bodies. 

"In  my  judgment  these  two  provisions  were  and  are  perfectly  adequate  to 
secure  every  public  object,  however,  freely  we  may  grant  to  private  enterprise 
all  the  powers  necessary  to  enable  it  to  create  these  great  machines  of  travel 
and  transportation,  and  to  the  management  of  them  by  corporate  bodies,  which 
can  serve  the  public  with  more  skill  and  economy  than  the  State  can.  .  .  . 
Experience  has  shown  that  the  tendency  thus  far  of  railways  has  been,  not  to 
overcharge  the  public,  but  rather,  through  excessive  competition  among  them- 
selves, to  serve  it  more  cheaply  than  they  could  afford.  They  do  not  now, 
taking  the  country  together,  reserve  to  their  stockholders  and  for  their  bond- 
holders much,  if  anything,  over  25  per  cent  of  the  cost  of  carriage  to  the  pub- 
lic. .  .  .  The  people  of  this  country  ought  to  know  that  whenever  they  pay 
a  dollar  for  any  transportation  or  for  travel,  not  less  than  20  or  25  cents  of  that 
dollar,  is  not  the  cost  of  the  service  they  receive,  but  taxation  unduly  imposed  on 
such  subjects  in  our  time.  If  one-half  of  the  net  earnings  of  railways  goes  to 
their  creditors,  the  bondholders,  then  not  more  than  i2j^  to  15  per  cent  of  their 
gross  earnings  are  received  by  the  proprietors  of  these  great  works,  the  stock- 
holders. This  includes  all  interest  on  the  investments  of  the  proprietary  class, 
and  all  indemnity  for  the  risks  of  their  enterprises,  and  all  compensations  for 
a  supervisory  attention  to  their  administration. '' 

As  early  as  1846  Michael  Hoffman,  one  of  the  ablest,  broadest 
and  most  far-seeing  men  of  this  century,  said  in  the  Constitutional 
Convention  of  New  York  of  that  year : 

"Neither  in  form  nor  substance  do  I  accede  to  the  doctrine  that  the  canal 
tolls  shall  be  taken  for  general  purposes.  I  deny  it.  The  right  of  way  is  the 
right  of  the  million.  The  sovereign  holds  it  in  trust  and  can  exercise  it  only 
for  their  benefit,  and  has  no  right  to  make  a  revenue  out  of  it.  Such  a  course 
must  endanger  the  worst  oppression  and  the  worst  corruptions,  and  soon  real- 
ize the  worst  vices  of  the  worst  ^governments;  taxation  on  all  we  consume, 
which  will  allow  nothing  to  go  to  or  from  the  markets  without  tribute  to  the 
State." 


64  UNITY  OF  RAILWAYS  AND  RAILWAY  INTERESTS. 

This  was  said  of  a  State  highway  of  commerce,  the  Erie  Canal, 
the  greatest  monument  of  practical  wisdom  in  the  Empire  State. 
It  was  not  until  November,  1882,  that  Hoffman's  conception  of  a 
free  highway  for  commerce  was  realized  by  the  adoption  of  a  con- 
stitutional amendment  providing  that  ' '  no  tolls  shall  hereafter  be 
imposed  on  persons  or  property  transported  on  the  canals." 

How  far  the  powers  of  Government  can  be  wisely  exercised  in 
relieving  the  commerce  and  its  instrumentalities  from  burdens  is 
an  interesting-  question  beyond  the  scope  of  this  paper.  Manifestly, 
free  wharves  for  shipping,  and  ample  terminal  facilities  for  rail- 
ways, at  minimum  cost,  are  among  the  most  important  elements 
of  commercial  prosperity. 

The  conditions  existing  twenty-five  years  agfo,  so  strongly  de- 
picted by  Mr.  Tilden,  have,  through  "  excessive  competition  "  and 
other  causes,  become  steadily  worse  for  the  railways ;  and  at  the 
present  time  about  two- thirds  of  the  ''  proprietary  class  "  receive 
no  increment  whatever  on  their  investments.  The  argument, 
therefore,  for  relief  from  unwise  taxation,  and  in  favor  of  reason- 
able methods  for  mitigating  the  effects  of  competition,  and  pre- 
serving revenue,  has  been  greatly  re-enforced  by  the  lapse  of 
time. 

One  other  particular  remains  to  be  mentioned  in  which  the 
unity  of  railways  is  important.  This  is  in  respect  to  governmental 
regulation.  Regulation  is  a  duty  of  Government,  and  in  some 
form  it  will  be  continued.  But  regulation,  to  be  effective,  must 
cover  the  whole  subject.  Divided  regulation,  like  divided  author- 
ity of  any  kind,  can  only  lead  to  confusion  and  embarrassment. 
We  have  now  our  systems  of  Federal  regulation  and  of  multiplied 
State  regulation.  Collision  and  friction  are  to  a  greater  or  less 
extent  inevitable.  Uniformity  under  such  circumstances  is  prac- 
tically impossible.  An  instructive  instance  of  this  character  is 
furnished  by  recent  events  in  Texas.  Certain  regulations  of  the 
Commission  of  that  State,  which  seemed  to  proceed  upon  the 
theory  that  the  railway  business  of  the  State  could  be  isolated 
from  the  general  commerce  of  the  country,  have  been  enjoined  by 
the  Federal  courts  because  they  were  unduly  prejudicial  to  rail- 
ways as  carriers,  and  because  local  judicial  redress  was  prohibited. 
This  could  not  have  happened  under  Federal  law  or  a  Federal 
Commission.  Considering  that  railways  and  their  business  are  so 
unified  both  within  State  lines  and  interstate,  there  cannot  be  just, 
uniform  and  efficient  regulation  except  under  one  authority,  and 
that  must  necessarily  be  the  Federal  authority.  As  has  been  often 
said,  the  business  of  a  railway,  whether  within  a  State  or  inter- 
state, is  so  blended  and  mingled,  both  with  respect  to  the  traffic 
and  the  agencies  by  which  it  is  carried,  that  separation  for  pur- 
poses of  regulation,  or  even  taxation,  is  impracticable.  The  traf- 
fic all  moves  on  the  same  tracks,  is  carried  in  the  same  cars, 
handled  by  the  same  employes ;  and  all  is  managed  by  the  same 


UNITY  OF  RAILWAYS  AND  RAILWAY  INTERESTS. 


65 


officials,  and  the  same  treasury  receives  and  disburses  all  moneys. 
How  a  part  of  this  business  can  be  segregated  for  one  system  of 
regulation,  and  part  for  another  system,  is  a  problem  that  has  not 
yet  been  solved.  It  may  be  sai4  that  the  country  is  too  large,  the 
railroad  system  too  great,  and  the  transportation  business  too  vast 
for  one  central  regulating  body.  But  however  this  may  be,  there 
can  be  one  plan  and  method  of  regulation,  with  general  powers  in 
the  central  tribunal,  and  auxiliary  agents  or  boards  in  every  State 
or  specified  territorial  division,  and  all  working  in  harmony. 
Whether  a  constitutional  change  may  be  required  to  bring  about 
entire  regulation  under  Federal  authority,  or  whether  .the  Federal 
courts  may  evolve  the  necessary  power  under  existing  provisions, 
from  the  nature  of  the  business,  are  questions  that  need  not  be 
discussed.  It  is  sufficient  at  present  to  refer  to  the  facts  of  the 
situation,  and  to  invite  attention  to  the  logic  of  the  condition. 

Some  important  practical  suggestions  flow  from  a  sober  consid- 
eration of  the  unity  of  railways  and  railway  interests.  One  of 
these  is  the  popular  conception  concerning  railways.  As  viewed 
by  the  public,  railways  stand  as  a  class  or  body.  There  is  no 
separation  of  the  body  into  good  or  bad,  strong  or  weak  members. 
And  this  conception  is  shared  generally  by  the  various  orders  of 
society,  by  citizens  at  large,  by  shippers,  by  lawmakers  and  the 
courts.  As  a  natural  and  almost  inevitable  consequence,  the  mor- 
als and  conduct  of  railway  managers  as  a  class  are  estimated  by 
the  behavior  of  the  worst  among  them.  The  faults  and  miscon- 
duct of  a  few  reckless  and  unprincipled  managers  (and  happity  they 
are  comparatively  few)  are  imputed  to  the  class  and  to  the  busi- 
ness. The  public  omits,  or  does  not  care  to  discriminate  between 
the  innocent  and  the  culpable.  The  whole  body  is  held  responsi- 
ble and  shares  in  whatever  odium  may  be  justly  due  to  only  a 
few.  And  the  retributions  of  public  sentiment,  of  legislative 
bodies  and  of  the  judicial  tribunals  fall  with  equal  severity  upon  all. 

Another  of  these  is  the  importance  of  a  higher  standard  among 
railways  than  has  yet  been  attained.  Like  individuals,  they  must 
deserve  public  confidence  and  respect  in  order  to  enjoy  them. 
Manifestly  it  is  greatly  to  the  interests  of  railways  that  the  highest 
standard  possible  should  be  maintained  by  all.  Railroads  ideally 
managed  would  need  no  law  to  regulate  them.  Law  is  intended 
only  to  prevent  and  punish  wrongdoing.  Law  for  railroads  is  the  in- 
telligent judgment  of  society  with  respect  to  what  is  best  for  itself 
and  for  the  roads  as  part  of  the  social  organization.  This  is  the  point 
for  the  railways  to  apprehend  and  apply  to  themselves.  In  the  past, 
overlooking  too  often  their  essential  unity  and  their  indivisibility 
from  the  public  standpoint,  they  have  in  the  main  recognized  only 
one  principle  in  their  relations  toward  each  other,  the  heathenish 
notion  of  retaliation.  If  wrong  was  done  by  a  road,  retaliation  was 
at  once  resorted  to  by  others ;  and  too  often  frightful  sacrifice  cf 
property  rights  has  been   the  result.     This  eye  for  an  eye  and 

5 


66  UNITY  OF  RAILWAYS  AND  RAILWAY  INTERESTS. 

tooth  for  a  tooth  poUcy,  a  barbarous  appHcation  of  lynch  law 
methods  to  great  property  interests,  society  has  made  up  its  mind 
shall  cease.  It  is  prejudicial  to  great  and  varied  public  interests, 
-a  savage  anachronism  in  an  enlightened  age,  and  the  public  good 
-demands  its  abatement.  Prevention  by  lawful  means  must  take 
the  place  of  retaliation.  Equitable  principles  embodied  in  statute 
law  now  regulate  the  conduct  of  railways.  A  faithful  observance  of 
these  principles,  and  compliance  with  prescribed  rules  of  conduct, 
would  of  themselves  correct  most  of  the  faults  charged  against 
railroads  as  a  class,  and  leave  little  just  cause  of  complaint.  But 
if  offenses  should  still  come  offenders  should  confront  the  majesty 
and  authority  of  Government,  and  be  dealt  with  by  the  civilized 
codes  to  which  offenders  against  other  laws  are  subject,  and  not 
by  the  barbarous  code  of  private  retaliation.  It  rests  largely  with 
the  railroads  themselves  to  elevate  their  body  in  the  public  esti- 
mation by  substituting  legal  remedies  for  destructive  warfare. 
They  can  magnify  the  law  and  make  it  honorable.  If  in  a  case  of 
bad  faith,  infractions  of  agreements,  and  violations  of  established 
schedules,  present  laws  are  not  sufficient,  additional  legislation 
can  readily  provide  summary  remedies  to  restrain  offenders  and 
punish  their  derelictions.  Then,  if  well-disposed  roads  shall  co- 
operate with  the  public  authorities,  they  can  remove  most  of  the 
reproaches  charged  upon  the  system  as  a  whole,  and  confine 
reprobation  to  actual  culprits,  who  would  be  left  to  face  the  law, 
the  courts  and  public  sentiment  single-handed. 
Xingston,  N.  Y. 


THE  RAILROADS  AS  ONE  SYSTEM. 

Byjoseph  Nimmo^  Jr. 

Out  of  chaos — cosmos.  This  suggests  the  generally  accepted 
law  of  evolution — a  natural  tendency  of  forceful  elements  toward 
organic  life  and  organic  unity.  It  is  a  law  which  asserts  itself  not 
only  in  nature,  but  in  the  social,  industrial  and  commercial  prog- 
ress of  the  age.  It  voices  the  inevitable  and  therefore  carries 
with  it  its  own  sanction.  Men  submit  to  its  decrees  without  ques- 
tion and  with  an  instinctive  faith  in  their  beneficence.  It  is  the 
glory  of  the  common  law  that  in  the  domain  of  justice  it  proclaims 
the  best  results  of  the  evolutionary  experiences  of  mankind  under 
democratic  government. 

Although  we  live  in  a  phenomenally  statute-making  age,  and 
one  in  which  the  human  mind  seems  to  be  more  prone  than  ever 
before  to  project  lines  of  development,  yet  the  widening  thought 
of  men  is  coming  to  the  faith  that  there  is  an  unobserved  onward 
movement  in  the  affairs  of  the  world  above  all  human  prescience 
or  control,  and  that  unless  men  build  better  than  they  know  they 
will  build  in  vain. 

It  is  the  object  of  this  paper  to  trace  in  rapid  lines  the  evolution 
of  the  American  railroad  system  with  special  reference  to  its  rela- 
tions to  the  social,  industrial  and  commercial  interests  of  the 
country.  An  attempt  will  also  be  made  to  present  certain  practi- 
cal lessons  which  the  subject  suggests  at  the  present  time. 

The  American  railroad  system  is  the  most  wonderful  product  of 
human  invention,  adaptation  and  enterprise  of  this  the  most  pro- 
gressive of  the  centuries.  It  correlates  the  arts  and  sciences  of 
the  age  in  one  grand  utility.  Conformity  to  its  possibilities  and 
to  the  peculiar  exigences  of  its  physical  characteristics  has  revolu- 
tionized the  commercial  methods  and  the  social  habits  of  the 
world.  This  has  been  accomplished  mainly  within  the  memory 
of  persons  now  living,  some  of  whom  even  at  this  day  would  re- 
gard it  as  an  unkindness  to  be  designated  as  old  men. 

The  railroads  built  in  this  country  up  to  about  the  year  1850 
were  crude  affairs  and  gave  but  slight  intimation  of  the  commer- 
cial characteristics  of  the  railroads  of  the  present  day.  For  many 
years  after  Stephenson's  locomotive  made  its  famous  competitive 

Reprinted  by  permission  from  The  Railway  Age  and  Northwestern  Railroader  of  January 

27,  1893. 


68  THE  RAILROADS  AS  ONE  SYSTEM. 

trial  trip  the  people  of  England  and  of  the  United  States  clung-  to 
the  idea  that  the  railroad  must  become  a  free  highway  of  com- 
merce in  the  sense  in  which  that  expression  is  applied  to  wagon 
roads,  canals,  rivers,  lakes  and  the  ocean;  and  yet  the  fact  is 
clearly  recognized  today  that  there  is  nothing  which  prevents  the 
railroad  from  being  in  the  most  absolute  sense  of  the  term  a  com- 
mon or  impartial  carrier,  subject  to  all  the  economic  and  commer- 
cial restraints  which  the  law  of  the  common  carrier  imposes  upon 
carriers  on  free  highways  of  commerce.  Although  the  most 
marked  characteristic  of  the  railroad — its  pathway  no  wider  than 
the  wheel  of  the  vehicle  which  moves  upon  it — forbade  that  it 
should  become  a  free  highway  of  commerce  and  gave  to  it  an  in- 
evitable aspect  of  monopoly,  yet  it  has  done  far  more  than  all  the 
free  highways  of  the  world  toward  creating  and  setting  in  motion 
competitive  forces  whose  interaction  has  been  irresistibly  reducing 
and  equalizing  prices  and  transportation  charges.  In  truth  car- 
riage by  rail  has  so  intensified  competition  in  transportation  and 
in  trade  as  to  create  disorder  and  at  times  to  threaten  a  general 
collapse  in  the  business  interests  of  the  country.  Hence  the  ne- 
cessity which  has  arisen  from  self-restraint  on  the  part  of  the 
companies  in  connection  with  supplemental  governmental  re- 
straints. 

From  the  year  1830,  when  the  first  railroad  was  opened  for 
traffic  in  this  country,  until  about  the  year  1850,  each  railroad  in 
the  United  States  was,  as  a  rule,  operating  independently  of  all 
other  railroads.  The  bare  idea  of  connecting  the  tracks  of  differ- 
ent companies  having  a  terminus  in  the  same  town  was  repelled 
by  railroad  managers  as  something  in  the  nature  of  an  entangling 
alliance  fraught  with  complications  and  administrative  difficulties 
which  had  better  be  avoided.  Besides,  the  drayman  and  the  for- 
warding merchant  asserted  their  right  to  live,  and  the  railroad 
companies  had  respect  for  such  opposition.  Different  gauges  were 
adopted  in  many  instances  for  the  express  purpose  of  preventing 
"the  carriage  of  freights  from  being,  and  being  treated  as  one 
continuous  carriage  from  the  place  of  shipment  to  the  place  of 
destination,"  a  practice  now  treated  by  the  interstate  commerce 
act  as  a  public  offense.  (See  section  7.)  One  of  the  largest  and 
perhaps  most  notable  instances  of  the  policy  of  breaking  gauge 
for  the  specific  purpose  of  securing  to  a  city  the  commercial  ad- 
vantages which  that  expedient  was  supposed  to  afford  was  that  of 
the  Cincinnati  Southern  railroad,  an  important  line,  2>?>^  miles  in 
length,  built  by  the  city  of  Cincinnati,  and  completed  about  the 
year  i88o. 

But  the  social,  commercial,  postal  and  military  necessities  of 
the  age  rapidly  brushed  aside  all  obstacles  to  the  formation  of 
that  great  American  railroad  system  which  is  today  unto  the 
traveler  and  the  shipper  as  one  instrumentality  of  transportation, 
embracing  nearly  200,000  miles  of  track,  administered  and  oper- 


THE  RAILROADS  AS  ONE  SYSTEM.  69 

ated  as  though  by  one  central  authority.  This  wonderful  organic 
development  has  involved  connected  tracks,  a  common  track 
gauge,  union  depots,  through  rates,  the  uniform  classification  of 
commodities,  rate  agreements,  prorating,  through  tickets,  related 
time  schedules,  the  unimpeded  passage  of  freight,  passenger  ex- 
press and  postal  cars  and  of  locomotives  over  the  tracks  of  differ- 
ent companies,  and  to  a  considerable  extent  the  employment  of 
operatives  in  the  pay  of  one  company,  upon  the  lines  of  other  com- 
panies. Each  company  has  also  become,  in  ten  thousand  in- 
stances, the  agent  of  many  other  companies  for  the  sale  of  tickets, 
the  collection  of  freight  moneys,  and  the  procurement  of  traffic. 
This  practical  unification  of  the  great  work  of  transportation  by 
rail  came  about  not  advisedly,  or  as  the  result  of  design  or  forecast 
on  the  part  of  the  companies,  but  as  the  outcome  of  an  evolution 
resisted  by  them  at  every  stage  of  its  progress.  Obstacles  to  this 
union  of  lines  and  traffic  interests  which  at  first  appeared  insuper- 
able were  swept  aside  by  an  imperious  force  of  circumstance. 
During  this  entire  period  railroad  managers  were  divided  into 
two  schools  in  regard  to  this  new  development,  the  majority  op- 
posing and  the  minority  favoring  it.  Some  of  the  stronger  com- 
panies attempted  to  resist  the  movement  by  the  consolidation 
and  extension  of  their  lines,  assuming  that  thus  they  might  be  en- 
abled to  remain  a  law  unto  themselves.  But  in  time  they  too  were 
forced  to  acknowledge  the  compulsions  of  the  interdependent  re- 
lationships which  were  slowly  but  surely  evolving  one  vast  national 
railroad  system.  The  peculiar  environment  of  each  road  of  course 
had  much  to  do  with  the  detail  of  forming  connections  with  coter- 
minous roads  but  above  every  consideration  of  economy  and  con- 
venience there  arose  an  imperious  commercial  and  social  demand 
for  a  united  American  railroad  service.  To  this  was  added  a  more 
coercive  demand,  upon  the  outbreak  of  the  war,  which  was  to  de- 
termine the  question  of  maintaining  our  national  unity.  Military 
necessity  then  demanded  through  cars  and  through  trains  over 
the  lines  of  different  companies.  The  tracks  of  railroads  having 
terminals  on  opposite  sides  of  cities  were  connected  by  lines  con- 
structed through  or  around  such  cities  in  order  that  men  and  mu- 
nitions of  war  might  pass  unimpeded.  The  military  demand  for 
an  expedited  postal  service  also  gave  rise  to  the  post  office  on 
wheels,  in  which  the  work  of  assorting  and  distributing  the  mails 
is  done  on  trains  in  motion.  Then  the  sleeping  car  came  into 
vogue  with  a  rapidly  developed  and  imperative  demand  for  con- 
nected tracks  and  through  service  over  the  lines  of  two,  three  and 
four  or  more  different  companies.  It  was  in  vain  that  conserva- 
tive railroad  men  protested  against  the  loss  of  independence  and 
the  inconveniences  and  vexations  incident  to  forced  partnerships 
with  companies  and  with  railroad  officials  whom  they  would  gladly 
have  shunned.  The  most  serious  difficulties  arose  in  the  establish- 
ment of  a  through  or  interchanged  freight  car  service.     Some- 


70 


THE  RAILROADS  AS  ONE  SYSTEM. 


times  cars,  when  thus  employed,  far  from  the  road  upon  which 
they  belonged,  were  left  standing  for  days  and  even  weeks  on  side 
tracks  or  kept  in  use  without  any  authority  or  cbmpensation  for 
such  service.  In  many  instances  cars  were  thus  lost,  and  in  cer- 
tain cases  actually  stolen  by  being  repainted  with  the  name  of  the 
appropriating-  company  substituted  for  that  of  the  company  to 
which  they  belonged.  But  despite  all  these  inconviences  the  effort 
to  prevent  a  common  use  of  freight  cars  was  futile.  In  time  the 
difficulties  just  alluded  to  were  cured  by  car  service  associations 
and  auditing  arrangements  of  various  sorts.  Finally,  in  the  face 
of  untold  opposition,  frauds  and  frictional  resistances  incident  to 
the  imperfect  methods  of  conducting  joint  traffic,  the  American 
railroad  system  emerged  in  its  present  form  and  magnificent  po- 
tentialities for  good. 

The  social,  commercial,  industrial  and  political  forces  of  the 
country  have  beckoned  the  companies  on  to  this  unity  of  transpor- 
tation facilities,  as  absolute  and  as  imperative  in  its  manifestations 
as  is  the  political  unity  which  binds  towns,  counties  and  states  into 
a  nation  which  is  one  and  indivisible.  State  governments  also  have 
extended  solicitous  invitations  to  railroad  companies  to  construct 
their  lines  across  state  boundaries  in  order  to  form  such  connections, 
and  in  so  doing  to  exercise  freely  one  of  the  most  sacred  attributes 
of  governmental  sovereignty,  the  right  of  eminent  domain. 

At  last  a  concensus  of  the  social,  political  and  commercial  forces 
of  the  country  led  to  a  statutory  enactment  by  the  national  gov- 
ernment which  legalized  the  physical  combination  of  railroad  in- 
terests just  described.  I  refer  to  the  act  of  Congress  approved 
June  15,  1886.  This  statute,  the  most  important  concerning  the 
internal  commerce  of  the  United  States  which  has  ever  been  en- 
acted by  Congress,  was  simply  a  legal  recognition  of  something 
already  existent  as  an  organic  characteristic  of  the  transportation 
and  commercial  interests  of  the  country.  In  a  word,  it  was  nothing 
more  or  less  than  the  statutory  approval  of  an  institution  and  of 
usages  which  had  become  expressions  of  the  commercial  and  social 
life  of  the  nation.     The  act  in  question  reads  as  follows: 

An  act  to  facilitate  commercial,  postal  and  military  communication  among 
the  states. 

Whereas,  the  Constitution  of  the  United  States  confers  upon  Congress,  in 
express  terms,  the  power  to  regulate  commerce  among  the  several  states,  to 
establish  post  roads  and  to  raise  and  support  armies;  therefore. 

Be  it  enacted  by  the  Senate  and  House  of  Representatives  of  the  United 
States  i7i  Congress  assembled,  That  every  railroad  company  in  the  United 
States  whose  road  is  operated  by  steam,  its  successors  and  assigns,  be,  and  is 
hereby,  authorized  to  carry  upon  and  over  its  roads,  boats,  bridges  and  ferries 
all  passengers,  troops,  government  supplies,  mails,  freight  and  property  on 
their  way  from  any  state  to  another  state,  and  to  receive  conpensation  therefor, 
and  to  connect  with  roads  of  other  states,  so  as  to  form  continuous  lines  for  the 
transportation  of  the  same  to  the  place  of  its  destination. 

****** 

Section  2.  And  be  it  further  enacted,  That  Congress  may  at  any  time 
alter,  amend  or  repeal  this  act. 


THE  RAILROADS  AS  ONE  SYSTEM. 


71 


This  act  of  Congress  fully  and  explicitly  authorizes  all  the  rail- 
road combinations  and  co-operative  arrangements  which  I  have 
just  described.  In  form  and  substance  it  is  permissive  and  clearly 
in  the  nature  of  a  grant  of  power.  It  also  expresses  an  implied 
contract,  viz :  a  duty  to  be  performed  in  consideration  of  a  privi- 
lege granted.  Therefore  it  may  be  properly  regarded  as  the 
charter  of  the  American  railroad  system. 

That  it  had  this  significance  in  the  minds  of  its  framers  is  clearly 
indicated  by  the  fact  that  out  of  abundant  caution  it  was  provided 
in  the  second  section  "  that  Congress  may  at  any  time  alter,  amend 
or  repeal  this  act."  This  provision  was  apparently  prompted  by 
a  fear  even  then  entertained  by  many,  that  such  intimate  combi- 
nations among  the  railroads  might,  in  the  course  of  their  develop- 
ment, prove  detrimental  to  the  public  interests.  That  apprehen- 
sion, however,  no  longer  has  place  in  the  minds  of  the  American 
people. 

But  the  American  railroad  system  has  a  higher  charter  even  than 
this  statutory  enactment,  and  that  is  the  very  charter  of  the  gov- 
ernment itself — the  will  of  the  people,  for  this  act  formulates  at 
once  the  public  needs  and  the  public  sense  of  what  is  necessary 
and  proper  concerning  railroad  transportation  in  this  country. 

THE    FEDERATION    OF    THE    RAILROADS 

No  organization  of  human  devising  can  exist  as  a  forceful  entity 
in  the  absence  of  an  intelligent  directory.  The  American  railroad 
system  was  not  a  thing  which  could  run  alone.  Its  existence  in- 
volved conventional  agreements  touching  almost  innumerable 
matters  of  detail  an  d  co-operative  arrangements  for  the  mainten  ance 
of  such  relationships.  Hence  the  federation  of  the  railroads  by 
means  of  associations  of  various  sorts  followed  as  a  necessary  step 
in  the  processes  of  that  evolution  which  was  to  bring  them  all  into 
practical  unity.  Certain  of  these  organizations  are  based  upon  the 
idea  of  managing  the  traffic  of  great  geographical  areas,  while 
others  take  cognizance  of  great  traffic  currents.  There  are  also 
associations  which  have  for  their  object  the  management  of  through 
cars,  i.  e. ,  car  service  associations ;  other  associations  have  the  man- 
agement of  through  tickets,  of  baggage  and  baggage  checks, 
etc.,  etc.  There  are  besides  claim  associations  and  local  associa- 
tions of  various  sorts.  These  associations  constitute  the  mind  or 
administrative  thought  of  the  American  railroad  system.  Their 
function  embraces  the  classification  of  freights,  joint  rates,  traffic 
facilities,  the  apportionment  of  traffic,  receipts  from  traffic  and  a 
thousand  matters  of  detail  involved  in  the  administrative  manage- 
ment of  a  great  transportation  vSystem. 

The  agreements  thus  entered  into  by  the  companies  cover  two 
entirely  different  subjects — aoreements  in  regard  to  joint  traffic 
over  connecting  and  co-operative  lines,  and  agreements  between 
rival  lines  in  regard  to  competitive  traffic.     Traffic  associations 


72  THE  RAILROADS  AS  ONE  SYSTEM. 

also  embrace  the  enormous  work  of  adjusting  joint  traffic  accounts ; 
that  is  to  say,  they  are  clearing-house  establishments. 

Thus  the  law  of  organic  efficiency  was  to  a  very  great  extent 
substituted  for  the  law  of  unrestricted  competition.  This  of  course 
involved  a  considerable  sacrifice  of  independent  corporate  power. 
But  whenever  men  organize  for  the  accomplishment  of  any  great 
work  they  most  always  surrender  something  for  the  purpose  of 
gaining  something  which  eludes  disassociated  effort. 

The  thing  of  chief  interest  attained  by  the  federation  of  the  rail- 
roads was  the  maintenance  of  order  in  the  conduct  of  the  internal 
commerce  of  the  country.  The  time  had  come  when  the  alterna- 
tive confronted^  the  people  of  this  country — the  maintenance  of 
order  or  the  mamtenance  of  the  absolute  freedom  of  competition. 
Order  is  not  only  heaven's  first  law,  but  it  is  a  vital  condition  of 
all  living.  Competition  on  the  other  hand  is  only  a  manifestation 
of  living  under  favoring  conditions.  And  yet  much  of  the  rea- 
soning of  the  day  would  place  the  maintenance  of  a  wild  and  de- 
structive competition  above  the  maintenance  of  order.  That  is  a 
great  mistake.  When  competition  becomes  so  fierce  that  it  de- 
generates into  disorder  it  passes  the  acme  of  its  possibilities  and 
becomes  the  very  swoon  of  existence — the  syncope  of  effort. 

The  practical  reforms  which  the  federation  of  the  railroads  ac- 
complished through  the  restraints  imposed  upon  reckless  and  de- 
structive competition  cover  the  following  subjects:  (a)  The  classi- 
fication of  freights;  (b)  the  rates  which  shall  be  charged;  (c)  the 
maintenance  of  agreed  rates ;  (d)  the  publication  of  rates,  and  (e) 
due  notice  of  changes  in  rates.  Each  one  of  these  conventional 
arrangements  is  now  recognized  as  being  in  the  nature  of  a  just 
and  proper  regulation  of  the  internal  commerce  of  the  country  and 
absolutely  necessary  to  its  orderly  conduct.  For  this  reason  such 
self-imposed  regulations  on  the  part  of  the  companies  have  been 
legalized  by  the  act  to  regulate  commerce.  As  such  statutory 
provisions  formulate  what  had  already  been  evolved  by  usage, 
they  may  be  regarded  as  expressions  of  American  common  law. 

But  even  as  thus  organized  railroad  traffic  associations  exhibited  a 
fatal  infirmity.  The  reforms  which  they  proposed  were  beneficent, 
but  the  spirit  of  the  reckless  and  uncontrolled  competition  survived. 
No  company  was  satisfied  with  the  share  of  the  traffic  which  it  se- 
cured. In  order  to  secure  that,  each  company  employed  soliciting 
agen,ts  who  were  stationed  far  and  wide  at  the  principal  centers  of 
traffic  on  connecting  lines.  That  lead  to  confusion  worse  con- 
founded. In  the  case  of  a  loss  of  traffic  by  any  one  company,  the 
order  was  issued  to  its  widely  scattered  soliciting  agents  to  secure 
the  desired  traffic  at  any  rates  which  might  be  necessary  in  order 
to  secure  it.  That  involved  not  only  a  violation  of  rate  agreement, 
but  it  was  essentially  an  abdication  of  the  rate  making  power  of 
each  company  into  the  hands  of  an  army  of  agents  acting  without 
the  caution  which  attaches  to  ownership,  and  relieved  of  all  re- 


THE  RAILROADS  AS  ONE  SYSTEM.  73 

sponsibility  for  results.  The  inevitable  tendency  of  this  condition 
of  affairs  was  toward  commercial  disorder — widespread  and  disas- 
trous. For  example,  a  contest  between  the  lines  connecting  Chi- 
cago and  Boston  at  one  time  so  beat  down  rates  between  those 
points  that  for  weeks  traffic  moved  from  New  York  to  Chicago  via 
Boston.  Even  Philadelphia  and  Baltimore  traffic  to  and  from 
Chicago  began  to  move  by  the  way  of  Boston.  This  of  course  in- 
augurated confusion  into  the  commercial  affairs  of  the  country. 

Rates  reasonbly  remunerative  to  the  carriers,  common  to  all 
shippers  and  steadily  maintained  are  found  to  be  infinitely  better 
for  the  general  good  of  the  country  than  much  lower  rates,  un- 
justly discriminating  and  wildly  fluctuating,  which  inevitably  run 
to  disorder. 

But  a  trouble  even  more  serious  arose  from  an  external  source. 
The  larger  shippers  made  constant  efforts  to  induce  particular 
roads  to  grant  them  discriminating  rates  as  against  other  shippers, 
by  throwing  their  entire  traffic  on  lines  which  would  enter  into 
such  unjust  arrangements.  This  was  demoralizing  not  only  to 
conduct  of  transportation,  but  also  to  the  commercial  interests 
of  the  country.  It  went  in  the  face  of  all  right  and  all  justice. 
It  seemed  for  awhile  as  though  the  evolution  of  the  American 
railroad  system  had  proceeded  up  to  a  certain  point  and  then 
chaos  had  come  again.  And  yet  it  was  too  absurd  for  serious 
thought  to  assume  that  the  men  of  this  generation  had  created  a 
vast  and  potential  system  of  transportation  which  they  lacked  the 
virtue  or  ability  to  administer.  It  was  therefore  clearly  perceived 
that  some  new  expedient  must  be  adopted  in  order  to  keep  this 
great  system  of  transportation  in  harmonious  action.  The  root  of 
the  difficulty  lay  in  the  fight  by  each  company  for  a  larger  share 
of  the  competitive  traffic  than  any  other  company  was  willing  to 
grant  it.  Hence  was  evolved  out  of  the  fierce  interaction  of 
forces  the  new  law  of  self-restraint — agreements  as  to  the  share  of 
the  competitive  traffic  which  should  be  carried  by  each  line.  This 
expedient,  although  abhorrent  to  independent  common  carriers  in 
the  narrow  sphere  in  w^hich  such  carriers  compete  on  disassociated 
free  highways  of  commerce,  was  seen  to  be  a  necessary  feature  of 
administration  upon  sharply  conditioned  highways  of  commerce 
constituting  by  their  enforced  relationships  one  vast  and  closely 
connected  American  railroad  system.  In  a  word,  it  was  seen  that 
competition  upon  such  a  system  of  transportation  must  be  placed 
in  a  harness  of  self  restraint  not  applicable  to  common  carriers  on 
turnpikes,  canals  and  rivers. 

The  agreement  as  to  the  apportionment  of  traffic  is  the  corollary 
of  the  rate  agreement.  The  former  is  no  more  in  restraint  of 
competition  than  is  the  latter.  Both  restrain  destructive  compe- 
tion,  which  runs  to  disorder.  This  is  not  theory,  nor  can  it  be  re- 
futed by  theory.  It  is  fact,  inculcated  by  the  hard  lessons  of  act- 
ual experience.     When  the  people  of  this  country  come  to  realize 


74 


THE  RAILROADS  AS  ONE  SYSTEM. 


this  important  truth,  as  they  certainly  will,  and  to  impose  upon 
their  representatives  in  legislative  assemblies  the  duty  of  conform- 
ing the  laws  of  the  country  to  this  natural  law  of  the  American 
railroad  system,  then,  and  not  until  then,  will  that  system  become 
an  orderly  and  self-regulated  institution. 

THE  COMMERCIAL  ENVIRONMENT   OF  THE  AMERICAN    RAILROAD    SYSTEM. 

It  is  impossible  to  appreciate  the  full  force  of  what  has  been 
said  in  regard  to  the  interaction  of  forces  whereby  the  American 
railroad  system  has  been  evolved  without  at  least  some  reference 
to  the  influences  which  have  been  exerted  by  the  commercial  forces 
of  the  country  in  the  course  of  that  evolution.  This  wonderful 
system  of  transportation  brought  every  center  of  trade  and  of  indus- 
try into  close  competition,  and  provided  a  means  whereby  the 
product  of  every  farm  and  of  every  mine  may  be  speedily  placed 
at  the  gates  of  commerce.  Besides,  the  physical  combinations 
which  have  been  described  had  corresponding  and  co-ordinate 
commercial  expressions  in  through  bills  of  lading  and  other  com- 
mercial arrangements  connecting  transportation  in  vitally  impor- 
tant particulars  with  trade  and  with  the  finance  of  commerce. 
All  this,  in  connection  with  the  facilities  for  quick  commercial  in- 
telligence afforded  by  the  telegraph  and  the  public  press,  has 
directly  and  indirectly  created  a  competition  of  commercial  forces, 
the  intensity  and  coercive  force  of  w^hich  was  never  before  experi- 
enced on  this  planet.  The  tendency  of  this  far-reaching  and  in- 
stant competition  has  been  irresistibly  toward  a  parity  of  values 
and  toward  a  constant  reduction  in  prices.  This  has  reacted  upon 
the  railroads  as  an  absolute  limitation  of  rate-making  which  no 
traffic  manager  can  resist.  For  example,  if  the  price  of  wheat  in 
Chicago  is  ninety  cents  and  in  New  York  one  dollar  and  ten  cents 
a  bushel  the  cost  of  transportation  must  be  less  than  twenty  cents 
in  order  to  insure  the  movement  of  wheat. 

There  is  no  popular  fallacy  more  misleading  than  the  assump- 
tion that  the  railroad  managers  of  the  country  exercise  a  very  wide 
range  of  discretion  in  the  matter  of  rate-making.  In  spite  of 
every  expedient  rates  have  fallen  while  traffic  has  increased.  This 
is  illustrated  by  the  fact  that  the  average  charge  per  ton  per  mile 
on  eighteen  of  the  principal  railroads  of  the  country  fell  from  1.896 
cents  in  1872  to  .926  in  1888,  a  decrease  of  50  per  cent,  while  the 
tonnage  carried  more  than  doubled  during  that  period. 

The  influence  which  commercial  forces  necessarily  exert  upon 
transportation  charges  may  also  be  inferred  from  the  fact  that  the 
value  of  goods  transported  on  railroads  each  year  is  about  three 
times  the  value  of  all  the  railroad  properties  of  the  country,  and 
at  least  thirty  times  the  total  railroad  receipts  each  year  from 
freight  traffic.  Then  there  is  the  fierce  struggle  of  rival  cities  for 
trade,  which  expresses  itself  in  constant  efforts  to  secure  unjustly 
discriminating  advantages.  When  to  this  is  added  the  struggle 
of  the  large  shippers  for  rates  discriminating  unjustly  in  their  favor, 
it  is  clearly  seen  that  the  companies  are  constantly  between  the 


THE  RAILROADS  AS  ONE  SYSTEM.  75 

devil  of  unj-ust  discrimination  and  the  deep  sea  of  popular  indig- 
nation which  such  discriminations  naturally  evoke.  These  are  the 
most  formidable  obstacles  to  the  harmonious  operation  of  the 
American  railroad  system.  Agreements  between  rival  carriers  as 
to  the  share  of  the  competitive  traffic  which  shall  be  awarded  to 
each  has  been  found  to  be  the  only  effective  means  of  removing 
the  temptation  to  accede  to  such  demands  for  unjustly  discrimi- 
nating rates,  which  not  only  disturb  the  orderly  conduct  of  com- 
merce, but  also  greatly  deplete  the  revenues  of  the  companies. 

And  now  I  think  I  have  in  a  somewhat  hurried  manner  pre- 
sented facts  and  considerations  which  may  be  regarded  as  an 
answer  to  the  question :  Why  the  railroads  should  be  treated  as 
constituting  one  American  railroad  system. 

This  statement  would  however  be  incomplete  without  some  brief 
notice  of  what  has  been  accomplished  in  the  direction  of 

GOVERNMENTAL    REGULATION    OF    THE    RAILROADS. 

It  was  impossible  that  such  a  mighty  evolution  of  commercial 
and  transportation  interests  as  that  already  described  could  have 
taken  place  in  this  land  of  liberty,  regulated  by  law,  without  giv- 
ing rise  to  some  manifestations  of  governmental  power.  It  became 
necessary  not  only  to  impose  restraints  upon  evils  but  to  give  legal 
effect  to  practices  and  usages  established  through  the  interaction 
of  forces  and  proved  by  the  lessons  of  experience  to  be  beneficial 
and  necessary.  This  political  solution  of  the  so-called  "railroad 
problem  "  has  for  a  generation  harassed  the  legislative  and  the 
judicial  mind  of  this  country.  Many  carefully  wrought  out  plans 
and  expedients  for  correcting  real  and  supposed  evils  have  been 
devised.  A  large  proportion  of  these  measures  has  resulted  in 
failure.  But  under  all  the  difficulties  which  surrounded  the  task 
that  was  not  a  strange  thing.  As  the  explorer  approaches  the 
harbor  of  a  strange  coast  he  finds  where  the  channel  is  by  running 
aground. 

When  the  act  to  regulate  commerce,  commonly  known  as  ' '  The 
Interstate  Commerce  act,"  took  effect,  April  5,  1887,  the  constitu- 
tional power  conferred  upon  Congress  of  regulating  ' '  commerce 
among  the  states  "  had  been  practically  dormant  for  a  period  of 
98  years.  Prior  to  that  date  the  American  railway  system  had 
been  evolved,  and  it  had  become  the  grandest  system  of  transpor- 
tation ever  seen  on  this  globe  in  point  of  speedy  carriage,  the 
facilities  afforded  for  the  distribution  of  freights,  regularity  of 
movement,  safety,  cost  of  transportation  and  general  efficiency. 
The  practical  difficulty  which  confronted  the  legislator  in  any 
general  scheme  of  regulation  was  the  betterment  of  this  splendid 
system  of  transportation. 

The  interstate  commerce  act  is  from  beginning  to  ending  based 
upon  the  idea  of  an  existent  American  railroad  system,  its  needs 
and  possibilities.  It  is  probably  true  that  the  legislator  had  not 
clearly  in  mind  this  particular  significance  of  the  statute,  but  that 


76  THE  RAILROADS  AS  ONE  SYSTEM. 

inadvertence  seems  to  illustrate  the  fact  that  in  the  processes  of 
an  evolution  men  build  better  than  they  know.  That  the  inter- 
state commerce  act  was  based  upon  the  conditions  imposed  by  the 
law  of  the  American  railroad  system  is  clearly  indicated  by  sec- 
tions 2  and  7  of  that  act.     The  language  of  section  2  is  as  follows : 

Every  common  carrier  subject  to  the  provisions  of  this  act  shall,  according 
to  their  several  powers,  afford  all  reasonable,  proper  and  equal  facilities  for 
the  interchange  of  traffic  between  their  respective  lines  and  for  the  receiving, 
f orwardmg  and  delivering  of  passengers  and  property  to  and  from  their  several 
lines  and  those  connecting  therewith,  etc. 

Already  the  railroad  companies  of  the  country  "according  to 
their  several  powers"  had  created  the  American  railroad  S5^stem, 
and  it  was  performing  all  the  functions  mentioned  in  this  section. 

Section  7  of  the  Interstate  Commerce  act  reads  as  follows : 

That  it  shall  be  unlawful  for  any  common  carrier  subject  to  the  provisions 
of  this  act  to  enter  into  any  combination,  contract  or  agreement,  expressed  or 
implied,  to  prevent,  by  change  of  time  schedule,  carriage  in  different  cars,  or 
by  other  means  or  devices,  the  carriage  of  freight  from  being  continuous  from 
the  place  of  shipment  to  the  place  of  destination ;  and  no  break  of  bulk,  stop- 
page or  interruption  made  by  such  common  carrier  shall  prevent  the  carriage 
of  freights  from  being  and  being  treated  as  one  continuous  carriage  from  the 
place  of  shipment  to  the  place  of  destination,  unless  such  break,  stoppage  or 
interruption  was  made  in  good  faith  for  some  necessary  purpose,  and  without 
any  intent  to  avoid  or  unnecessarily  interrupt  such  continuous  carriage  or  to 
evade  any  of  the  provisions  of  this  act. 

No  intelligent  legislator  would  ever  have  proposed  this  adminis- 
trative measure  if  the  practices  which  it  required  had  not  already 
become  firmly  established  by  the  railroad  companies  from  motives 
of  self  interest,  in  obedience  to  the  law  of  commercial  intercourse, 
wrought  out  by  the  interaction  of  forces.  This  section  of  the  act 
created  nothing,  but  simply  proposed  an  experimental  measure  for 
regulating  something  already  created  and  set  in  motion  by  forces 
superior  to  those  of  legislation. 

All  that  there  is  in  the  Interstate  Commerce  act  in  the  nature 
of  beneficent  regulation  is  based  either  upon  common  law  require- 
ments or  upon  usages  proved  to  be  wholesome  and  proper  in  the 
course  of  the  evolution  of  the  American  railroad  system.  The 
provisions  of  the  statute  which  relate  to  the  prohibition  of  unrea- 
sonable rates  and  unjust  discriminations  are  simply  re-enactments 
of  time  honored  rules  of  the  common  law.  The  provisions  which 
relate  to  securing  shipments  on  direct  and  most  convenient  lines 
were  already  in  force  as  rules  of  railroad  associations.  The  pro- 
priety of  this  latter  rule  of  conduct  was  clearly  enunciated  as  long 
ago  as  the  year  1874  in  the  report  of  the  investigating  committee 
appointed  by  the  Pennsylvania  Railroad  Company.  That  report 
clearly  enunciated  the  doctrine  that  railroad  companies  recognize 
their  true  interest  in  furnishing  ample  facilities,  and  by  refraining 
from  unwise  efforts  to  defeat  the  interests  of  the  shipper  in  the 
matter  of  attempting  to  dictate  the  route  or  destination  of  traffic; 


THE  RAILROADS  AS  ONE  SYSTEM.  yy 

that  being  determined  mainly  by  elements  other  than  the  way  of 
carriage. 

The  provisions  of  the  sixth  section  of  the  Interstate  Commerce 
act,  relating  to  joint  rates,  the  maintenance  of  agreed  rates,  the 
publication  of  rates,  and  ample  notice  of  intended  changes  in  rates 
were  already  cardinal  features  of  the  regulations  established  by 
railroad  associations.  It  was  also  the  ftmdamental  object  of  such 
associations  to  prevent  all  forms  of  rate  cutting  now  forbidden  by 
the  Interstate  Commerce  act.  Outside  of  these  wholesome  regu- 
lations the  provisions  of  the  act  to  regulate  commerce  may  be  de- 
scribed as  quasi- judical  and  quasi-administrative,  terms  which, 
however,  have  no  distinct  legal  or  practical  significance. 

It  is  unfortunate  that  in  giving  the  force  of  legality  to  so  much 
which  experience  had  proved  to  be  just  and  beneficent,  the  legis- 
lator should  have  gone  astray  in  regard  to  a  clearly  established 
law  of  the  American  railroad  system  which  had  been  forced  upon 
railroad  managers  by  the  logic  of  events.  I  refer  to  the  clearly 
established  fact  that  the  maintenance  of  rates  must  be  based  upon 
precedent  agreements  as  to  the  share  of  the  competitive  traffic 
which  shall  be  secured  by  each  competitor.  The  fifth  section  of 
the  act  forbids  such  agreements  and  thereby  forces  the  railroads 
to  the  violation  of  every  beneficent  provision  of  the  statute. 

The  specious  objection  is  urged  to  agreements  as  to  the  division 
of  traffic,  that  they  are  similar  to  agreements  made  by  the  sup- 
pression of  competition  and  for  establishing  monopolies  in  com-^ 
mercial  and  industrial  pursuits.  This  objection  ignores  the  whole' 
object  of  traffic  apportionment  agreements  and  the  conditions  un- 
der which  they  are  made.  It  is  a  sufficient  answer  to  such  objec- 
tion to  say  that  combinations  of  every  character  which  tend  to  for- 
ward almost  every  beneficent  enterprise  of  the  age  are  also  em- 
ployed for  evil  purposes.  Knives  are  instruments  of  great  utility, 
and  their  use  is  not  to  be  proscribed  because  they  are  sometimes 
employed  to  do  murder  and  to  commit  suicide.  It  is  manifest 
that  if  agreements  as  to  the  apportionment  of  traffic  shall  be  legal- 
ized, they  would  be  guarded  by  all  the  provisions  of  the  act  to 
regulate  commerce,  relative  to  the  publication  and  the  mainte- 
nance of  rates — provisions  which  in  the  hands  of  all  sensible  rail- 
road managers  would  become  efficient  instruments  of  self-govern- 
ment. 

The  refusal  to  comply  with  this  evident  leading  of  the  evolution 
of  the  American  railroad  system  has  naturally  evoked  a  fresh 
manifestation  in  another  direction,  viz.  :  the  consolidation  of  rail- 
road interests,  whereby  competitive  elements  are  eliminated.  That 
appears  to  be  the  only  other  recourse  against  destructive  competi- 
tion, which  invariably  leads  to  disorder. 

THE    LIMITATIONS    OF    GOVERNMENTAL    REGULATION. 

There  is  no  public  question  of  great  moment  at  the  present  time 


78  THE  RAILROADS  AS  ONE  SYSTEM. 

than  that  of  determining  the  proper  limitations  of  governmental 
regulation  of  the  railroads.  It  is  a  question  in  regard  to  which 
the  provisions  of  the  act  to  regulate  commerce  are  obscure  and 
concerning  which  the  Interstate  Commerce  Commission  appears  to 
be  at  sea.  The  subject  cannot  here  be  discussed  in  all  its  com- 
mercial and  political  bearings,  for  it  involves  a  careful  considera- 
tion of  those  fundamental  principles  which  engaged  the  profound- 
est  thought  of  the  founders  of  our  present  form  of  government. 
Our  political  institutions  are  based  upon  faith  in  individualism  as 
opposed  to  governmental  imperialism  and  upon  an  abiding  faith 
in  the  beneficent  results  of  that  conservatism  which  inheres  in  the 
untrammeled  interaction  of  commercial  and  industrial  forces. 
Those  political  principles  had  their  origin  in  the  deep-seated  con- 
viction of  our  race  that  one  honest  and  determined  effort  at  self- 
control  is  worth  a  hundred  efforts  at  governmental  control.  The 
civil  polity  which  voices  this  sentiment  is  recognized  in  this 
country  as  Jeffersonianism,  pure  and  simple.  I  am  free  to  confess 
that  a  somewhat  careful  study  of  the  commercial  development  of 
my  country  for  more  than  thirty  years  has  brought  me  more  and 
more  to  recognize  the  wisdom  of  the  line  of  policy  which  that  faith 
inspires  and  to  make  it  a  cardinal  doctrine  of  my  political  convic- 
tions. It  is  a  doctrine  which  discards  the  idea  of  directing  men 
how  to  go  aright  in  the  management  of  commercial  and  industrial 
affairs  and  claims  that  the  exercise  of  governmental  powers  in 
such  matters  shall  be  confined  as  closely  as  possible  to  the  preven- 
tion and  punishment  of  wrongs..  Governmental  administration  of 
the  subject  of  transportation  necessarily  involves  to  a  certain  ex- 
tent governmental  administration  of  the  commercial  interests  of 
the  country.  But  that  cannot  proceed  far  before  meeting  the  in- 
dignant protest  of  a  free  people. 

Again,  the  prevention  and  punishment  of  wrongs  under  govern- 
mental authority  involve  the  exercise  of  both  executive  and  the 
judicial  function.  Unfortunately  the  attempt  has  been  made  in 
the  act  to  regulate  commerce  to  unite  these  two  functions  in  the 
powers  granted  to  the  Interstate  Commerce  Commission ;  but  the 
federal  courts  have  steadfastly  refused  to  recognize  the  asserted 
judicial  character  of  that  body,  and  I  honor  the  judiciary  for  its 
loyalty  to  the  fundamental  principle  of  American  liberty  enunci- 
ated by  Alexander  Hamilton  and  adopted  by  Judge  Story,  that 
* '  there  is  no  liberty  if  the  power  of  judging  be  not  separated  from 
the  legislative  and  executive  powers." 

In  considering  this  vitally  important  matter  it  is  always  a  pleas- 
ure to  recall  the  words  of  the  Interstate  Commerce  Commission 
recorded  on  page  io6  of  their  third  annual  report: 

There  is  also  in  the  public  mind  a  sense  of  incongruity  between  the  prosecut- 
ing function     .     .     .     and  the  judicial  function. 

In  this  connection  I  would  briefly  allude  to  two  other  funda- 
mental errors  involved  in  the  act  to  regulate  commerce. 


THE  RAILROADS  AS  ONE  SYSTEM. 


79 


First,  it  embraces  provisions  which,  in  a  rather  vague  and  un- 
certain manner,  seem  to  confer  upon  the  commission  the  power  of 
rate  making.  Since  its  organization  the  interstate  commerce  com- 
mission has  been  afloat  upon  a  sea  of  speculation  in  regard  to  the 
question  as  to  whether  it  does  or  does  not  possess  that  power;  also 
as  to  the  conditions  under  which  it  shall  be  exercised.  I  maintain, 
for  reasons  which  it  is  unnecessary  to  elaborate  here,  that  the  ex- 
ercise of  such  a  power  by  the  national  government  is  un-Jefferson- 
ian,  un-American  and  opposed  to  sound  principles  of  public  policy. 
The  second  error  involved  in  the  Interstate  Commerce  act  relates 
to  the  equally  uncertain  function  of  forcing  railroad  companies 
to  connect  their  lines  and  to  enter  into  those  traffic  arrangements 
whereby  the  American  railroad  system  sprung  into  existence. 
This  involves  the  error  of  rate  making  as  well  as  that  of  meddling 
with  the  course  of  the  development  of  the  commercial  interests  of 
the  country — a  line  of  procedure  which  the  lessons  of  our  political 
and  commercial  experience  repel.  Such  interference  with  the  in- 
dustrial interests  of  the  country  may  respond  to  the  ebullitions  of 
passion  and  to  apparent  exigencies  in  the  nature  of  attempts  to 
circumvent  firmly  established  principles  of  American  liberty,  but 
they  can  acquire  no  permanent  place  in  the  governmental  policy 
of  this  country. 

In  the  practical  administration  of  the  powers  of  government  it 
is  always  a  nice  thing  accurately  to  discriminate  between  liberty 
regulated  by  law  and  liberty  enchained  by  law,  for  we  live  in  a 
world  of  imperfect  remedies — a  world  in  which  the  better  is  oft 
times  the  enemy  of  the  good.  It  is  certain  that  the  American 
railroad  system  can  never  become  "  the  faultless  monster  that  the 
world  ne'er  saw."  It  must  have  freedom  of  motion — room  for 
development  on  its  own  lines. 

If  the  question  is  ever  presented  to  the  people  of  this  country — 
Shall  we  have  governmental  railroad  regulation  which  violates 
fundamental  conditions  imposed  by  the  evolved  law  of  the  Amer- 
ican railroad  system  and  by  fundamental  principles  of  our  cher- 
ished political  institutions,  or  shall  we  have  no  governmental  regu- 
lations of  the  railroads? — there  is  not  the  slightest  doubt  in  my 
mind  that  the  latter  alternative  will  be  adopted.  And  I  reckon 
that  as  the  years  come  and  go  the  men  who  set  up  expedients  in 
violation  of  those  fundamental  principles  of  government  and  in 
contravention  of  those  lessons  of  experience  clearly  taught  in  the 
evolved  law  of  the  American  railroad  system  will  be  brought  to 
read  the  history  of  their  inventions  in  the  song  of  the  babbling 
brook : 

"  Men  may  come  and  men  may  go, 
But  I  go  on  forever." 


THE  FEDERAL  CONTROL  OE  RAILWAYS. 

By  Hon.   S.  M.    Cnllom. 

The  act  to  regulate  commerce,  popularly  known  as  the  inter- 
state commerce  act,  has  been  the  subject  of  discussion  by  all  classes 
of  men,  legislators,  lawyers,  judges  and  business  men.  The  act 
was  passed  by  congress  in  pursuance  of  the  constitution  of  the 
United  States  which  says  that  ' '  congress  shall  have  power  to  reg- 
ulate commerce  with  foreign  nations  and  among  the  several  states, " 
and  '' to  make  all  laws  which  shall  be  necessary  and  proper  for 
carrying  into  execution  the  foregoing  powers." 

One  of  the  controlling  objects  of  the  convention  which  assem- 
bled at  Annapolis  and  which  made  our  national  constitution  w^as 
''to  devise  means  for  the  uniform  regulation  of  trade."  There- 
fore each  of  the  thirteen  states  possessed  powers  separate  and  in- 
dependent, and  they  could  discriminate  in  the  regulation  of  cora- 
merce  in  favor  of  the  citizens  of  one  state  against  those  of  another. 
By  the  adoption  of  the  national  constitution  the  power  to  regulate 
commerce  among  the  states  was  taken  from  the  states  and  lodged 
exclusively  in  congress.     It  remains  there. 

All  fair-minded  men  will  agree  that  the  condition  of  affairs  in 
this  country  in  connection  with  the  operation  of  railroads  as  com- 
mon carriers  prior  to  the  passage  of  the  interstate  commerce  act 
necessitated  the  exercise  by  congress  of  constitutional  power  by 
enacting  legislation  for  the  "regulation  of  commerce  among  the 
several  states." 

The  passage  of  the  act  of  1887  encountered  stubborn  opposition, 
and  its  enforcement  has  been  exceedingly  difficult.  The  greed 
for  money  and  the  determination  to  secure  it,  impel  men  operating 
railroads  and  those  dealing  with  them  to  seek  an  advantage  over 
others  in  competition  with  them  to  the  extent  even  of  violating 
the  plain  letter  of  the  law  and  taking  the  chances  of  a  fine  and 
imprisonment. 

Several  judicial  decisions  have  been  rendered  which  weakened 
the  statute,  and  public  opinion  for  a  time  was  that  the  courts  had 
well  nigh  destroyed  the  law.  Nevertheless  the  act  is  not  destroyed 
and  will  not  be.  As  weak  places  are  found  in  the  act  they  will  be 
strengthened  by  amendment.     The  people  will  never  relinquish 

Reprinted  from  the  Railway  Age  and  Northwestern  Railroader  of  April  14,  1893, 


THE  FEDERAL  CONTROL  OF  RAILWAYS.         8i 

control  over  the  common  carriers,  which  are  quasi-public  corpora- 
tions representing  vast  wealth  and  power.  All  obstructions  thrown 
in  the  way  of  a  proper  constitutional  law  regulating  commerce 
among  the  states  will  be  removed  in  time. 

A  great  deal  of  friction  in  attempting  to  put  into  practical  oper- 
ation a  new  and  heretofore  untried  system  of  regulation — untried 
at  least  as  to  the  interstate  commerce  of  the  United  States — was 
inevitable.  The  questions  that  have  arisen  could  not  possibly  have 
been  forseen  or  guarded  against.  The  requirements  of  the  law 
against  unjust  discrimination  and  favoritism  as  between  persons, 
places,  and  particular  classes  of  traffic  pinched  very  hard  in  a  good 
many  quarters.  The  "big  fish"  were  placed  upon  an  equality 
with  the  little  ones,  or  more  nearly  so,  and  energetic  and  vigor- 
ous protests  from  those  who  have  been  enjoying  all  kinds  of  special 
privileges  and  advantages  at  the  expense  of  the  general  public  was 
but  to  be  expected.  But  I  have  regarded  it  as  the  duty  of  congress 
to  legislate  with  a  view  to  securing  the  greatest  good  to  the  greatest 
number,  and  while  the  act  has  not  proved  a  panacea  for  all  the  ills 
connected  with  commercial  operations,  it  has,  taken  by  and  large, 
proven  generally  beneficial  to  the  entire  country.  There  is  no  busi- 
ness question  in  which  the  people  of  the  country  have  a  deeper  in- 
terest, for  the  reason  that  there  is  none  which  bears  more  directly 
upon  their  financial  prosperity.  Cheap  transportation  and  equality 
of  rights  in  its  enjoyment  are  two  great  demands  of  the  times,  and 
the  nation  will  fail  of  its  duty  if  it  does  not  do  what  it  can  to  se- 
cure both  to  the  people.  The  best  possible  conditions  must  sur- 
round our  internal  commerce,  and  we  must  give  the  people  the  best 
possible  advantages,  whenever  we  can,  in  reaching  whatever  mar- 
ket may  be  open  to  them  in  any  of  the  nations.  The  constitution 
imposes  the  duty  upon  congress  of  regulating  commerce  among  the 
several  states  and  with  foreign  nations.  That  duty  must  be  dis- 
charged in  the  interest  of  the  people  without  fear  or  favor,  fearing 
not  to  do  right  by  all,  whether  engaged  in  one  pursuit  or  another, 
favoring  none,  whether  clothed  with  corporate  power  or  in  the 
common  walks  of  life.  Equality  of  rights  is  the  watchword  in  this 
country,  and  it  applies  as  well  to  business  transactions  as  to  any 
other  civil  right,  or  the  right  to  vote. 

All  laws  which  interfere  with  the  schemes  or  special  privileges 
of  men  secured  or  granted  against  public  policy  are  difficult  of 
enforcement,  but  this  fact  furnishes  no  valid  reason  w^hy  such  laws 
should  not  be  enforced. 

The  interstate  commerce  commission  has  done  great  work ;  no 
commission  or  court  in  this  country  has  ever  done  a  greater  work 
in  the  same  length  of  time.  It  has  decided  very  many  difficult 
questions  of  law  touching  the  transportation  question,  and  has 
settled  almost  numberless  differences  between  shippers  and  carriers 
without  serious  expense  to  either.  In  the  enactment  of  the  inter- 
state commerce  law  congress  intended  to  give  the  people  a  better 

6 


82         THE  FEDERAL  CONTROL  OF  RAILWAYS. 

and  cheaper  method  of  settling  disputes  or  differences  with  com- 
mon carriers  than  that  provided  by  the  common  courts  of  the 
country.  Congress  designed  that  the  commission  in  the  discharge 
of  its  duties  should  take  the  place  of  the  courts  in  so  far  as  power 
could  be  given  it  under  the  constitution  in  the  work  laid  out  for  it 
by  statute. 

I  may  briefly  refer  to  one  method  of  the  commission.  That  is 
the  informal  investigation  of  grievances  set  forth  in  the  correspond- 
ence of  shippers.  The  usual  course  is  to  verify  the  statement  of 
the  complainant  as  far  as  possible  to  do  so  in  the  office  of  the  com- 
mission. Then,  if  the  complainant  appears  to  possess  merit,  the 
carriers  concerned  are  called  upon  to  make  a  statement  in  relation 
to  the  matter  or  to  settle  with  the  complainant  if  the  facts  so 
require.  This  endeavor  to  adjust  differences  between  carriers  and 
shippers  without  formality,  delay  or  expense,  has  been  attended 
with  very  satisfactory  results.  The  settlement  of  overcharges  is 
thereby  greatly  facilitated,  for  instead  of  the  claim  paper  being 
sent  first  to  one  carrier  and  forwarded  by  it  to  its  connecting  road 
and  so  on  until  all  the  companies  whose  roads  are  linked  in  the 
through  line  have  passed,  and  oft-times  repassed,  upon  the  claim 
(as  was  the  case  before  the  passage  of  the  interstate  commerce 
act)  by  this  method  all  the  carriers  are  reached  at  once,  and  their 
reasons  why  the  matter  should  or  should  not  be  settled  are  con- 
sidered by  an  impartial  arbitrator  without  delay. 

The  world  soon  forgets  past  conditions.  Doubtless  few  now 
remember  the  utter  disregard  by  the  common  carriers  of  the  coun- 
try (I  speak  especially  of  railroads)  of  the  common  rules  of  fair 
dealing  with  those  engaged  in  shipping,  or  with  localities,  prior  to 
the  passage  of  the  interstate  commerce  act.  Extortion  was  prac- 
ticed at  non-competing  points;  unjust  discriminations  were  prac- 
ticed by  all  manner  of  devices — special  rates,  rebates,  drawbacks ; 
and  concessions  were  given  which  enriched  favored  shippers  and 
bankrupted  their  neighbors.  Men  engaged  as  presidents,  mana- 
gers and  superintendents  of  railroads  used  their  positions  to  amass 
fortunes  for  themselves  in  utter  disregard  of  the  public  interest. 
Many  of  them  seemed  to  know  no  law ;  they  were  a  law  unto  them- 
selves. A  patient  people  finally  determined  to  endure  no  longer 
such  a  condition.  State  legislatures  and  finally  congress,  as  a  re- 
sult, adopted  the  policy  of  regulation. 

The  decision  of  the  supreme  court  in  the  somewhat  famous 
Counselman  case  declared  that  Section  860  of  the  revised  statutes 
was  not  broad  enough  to  protect  from  prosecution,  witnesses  who 
might  by  their  testimony  become  their  own  accusers.  This  deci- 
sion made  it  difficult  to  secure  the  testimony  of  any  witness  iden- 
tified either  with  the  common  carriers  or  the  shippers,  and  conse- 
quently difficult  to  secure  convictions  for  violations  of  the  law.  An 
amendment  has  been  adopted  which  broadens  the  statute,  and  while 
requiring  witnesses  to  testify,  is  intended  to  give  them  absolute 


THE  FEDERAL  CONTROL  OF  RAILWAYS.  S$ 

protection.  The  decision  in  this  case  was  heralded  throughout  the 
country  as  a  knock-down  blow  to  the  interstate  commerce  law; 
eminent  lawyers  freely  announced  their  opinion  in  the  press  that 
the  decision  so  seriously  impaired  the  law  that  its  further  useful- 
ness was  a  matter  of  extreme  doubt,  while,  as  a  matter  of  fact,  as 
I  have  just  said,  the  decision  involved  no  provision  of  the  act  to 
regulate  commerce,  but  it  was  a  decision  announcing  that  Section 
860  of  the  revised  statutes,  enacted  in  1868,  was  not  broad  enough 
to  protect  witnesses  from  prosecution  on  account  of  their  own 
testimony.  It  was  a  provision  of  law  which  had  been  upon  the 
statute  book  for  nearly  thirty  years ;  under  it  evidence  had  been 
procured  from  witnesses  in  all  classes  of  cases,  including  those  in 
which  human  life  hung  in  the  balance,  and  never  until  the  methods 
of  a  great  corporation  were  to  be  inquired  into  had  the  sufficiency 
of  the  section  to  protect  witnesses  been  formally  raised  in  the 
higher  courts  of  the  country. 

The  decision  of  Judge  Gresham  in  declining  to  aid  the  interstate 
commerce  commission  in  compelling  certain  persons  to  produce 
books,  etc.,  and  to  testify,  was  regarded  as  a  severe  blow,  almost 
if  not  quite  destroying  the  usefulness  of  the  commission.  The 
learned  judge  however  indicated  a  remedy  for  the  adjudged  defect 
in  the  law  and  suggested  the  character  of  legislation  necessary  to 
enable  the  commission  to  compel  witnesses  to  attend,  to  testify, 
and  to  produce  books,  etc.  ;  and  that  legislation  has  been  enacted. 
The  two  decisions,  therefore,  which  have  most  embarassed  the 
enforcement  of  the  act  to  regulate  commerce  have  been  overcome 
by  new  legislation,  the  legislation  following  the  line  of  the  decision 
in  each  case. 

Important  legislation  affecting  vast  interests,  overturning  old 
conditions  and  requiring  new  methods  is  always  resisted  and  sub- 
jected to  the  most  critical  analysis  and  the  severest  tests  by  the 
courts.  The  commerce  act  has  been  subject  to  such  criticisms  and 
tests  and  will  continue  to  be  perhaps  in  the  future.  The  people 
will  finally  learn  what  their  rights  are,  however,  and  it  is  to  be 
hoped  that  when  the  duties  and  obligations  of  the  common  carriers 
doing  an  interstate  business  are  more  clearly  defined,  the  laws  will 
be  more  generally  obeyed  and  greater  harmony  will  prevail  between 
carriers  and  shippers.  The  common  carriers  cannot  live  and  pros- 
per without  the  aid  of  the  people,  and  the  people  cannot  afford  to 
do  the  carriers  an  injustice.  The  prosperity  of  the  one  is,  in  a  large 
degree,  dependent  on  the  other.  No  business  in  a  community  or 
a  state  can  be  injured  by  unwise  legislation  or  by  any  other  means 
without,  to  some  extent,  impairing  other  business  interests.  Hence 
in  legislation  under  the  constitution,  the  utmost  care  should  be  ob- 
served so  that  only  wise  laws  should  be  enacted.  The  vast  wealth 
invested  in  American  railroads,  amounting  to  about  $10,000,000,- 
000,  must  be  given  an  equal  chance  with  investments  in  other  enter- 
prises.    No  fair-minded  man  should  seek  to  enforce  by  legislation 


84  THE  ii^EDERAL  CONTROL  OF  RAILWAYS. 

a  policy  which  becomes  injurious  to  any  legitimate  business  enter- 
prise whether  carried  on  by  individuals  or  by  corporations.  The 
difficulty  in  dealing  with  railroad  common  carriers  is  to  properly 
enforce  just  laws.  There  are  good  and  bad  men  engaged  in  the 
conduct  of  railroads,  just  as  there  are  in  any  other  business — men 
who  are  not  honest  and  do  not  enjoy  doing  even  honest  things  in 
an  honest  way,  if  any  other  way  can  be  found. 

The  railroad  interest  in  this  country  stands  more  nearly  perhaps 
as  one  interest  than  does  any  other.  Legislation  affecting  it  should 
be  enacted  in  the  light  of  the  fact  that  while  there  are  hundreds 
of  separately  chartered  and  organized  railroad  companies  the  com- 
binations and  consolidations  which  have  been  made  have  resulted 
in  placing  the  control  of  the  American  roads  in  the  hands  of  but 
a  few  men.  If  this  were  not  so,  that  great  interest  must  still  be 
recognized  as  distinctly  one  by  itself,  and  legislation  in  respect  to 
it  must  be  enacted  in  full  recognition  of  the  fact  that  the  practice 
of  unjust  discriminations,  rate  cutting  or  other  schemes  of  viola- 
tion of  the  common  or  statute  law  by  one  common  carrier,  how- 
ever remote  from  the  others,  has  its  injurious  effect  upon  the 
others.  This  being  so,  it  is  pleaded  as  an  excuse  by  those  who  de- 
sire to  obey  the  law  that  self-preservation  drives  them  to  violate  it 
because  other  carriers  persist  in  doing  so.  Railroad  companies 
urge  that  no  law  for  the  prevention  of  unjust  discriminations  will 
or  can  be  enforced  as  against  all  the  common  carriers,  unless  the 
anti-pooling  section  of  the  commerce  act  shall  be  repealed  and  a 
law  passed  legalizing  contracts  between  railroad  common  carriers 
authorizing  pooling  in  some  form.  Opposition  to  pooling  by  com- 
mon carriers  is  strong  in  the  minds  of  the  people,  and  it  is  urged 
with  great  force  that  to  legalize  pooling  of  freights  and  earnings, 
or  either,  would  result  in  the  carriers  being  able  to  maintain  higher 
rates  than  would  otherwise  obtain ;  that  whatever  power  might  be 
given  to  the  commission  the  charges  upon  freight  and  passengers 
would  be  increased  as  the  result  of  the  effect  of  contracts  under 
which  competition  would  cease.  Stability  of  rates  is  important  to 
the  business  of  the  country  as  well  as  to  the  railroads,  but  fluctua- 
tions in  rates  are  less  objectionable  than  a  constant  oppression  of 
all  business  by  high  rates.  The  men  engaged  in  the  railroad  busi- 
ness do  not  regard  the  repeal  of  the  anti-pooling  provision  of  the 
law  as  sufficient  to  give  the  relief  they  desire.  Before  the  law  was 
passed  prohibiting  pooling  the  carriers  made  pooling  contracts, 
but  as  they  were  regarded  by  the  people  and  held  by  the  courts  to 
be  contrary  to  public  policy  they  could  not  be  enforced,  and  fluct- 
uations in  railroad  rates  were  constantly  going  on  as  the  result  of 
the  scramble  incident  to  unrestrained  competition. 

The  passage  of  the  act  to  regulate  commerce  checked  fluctua- 
tion of  rates  to  an  extent  by  requiring  ptiblication  of  any  change 
of  rates  and  by  providing  penalties  for  violations  of  the  act.  Sta- 
bility of  rates  is  unquestionably  in  the  interest  of  the  general  busi- 


THE  FEDERAL  CONTROL  OF  RAILWAYS.  85 

ness  of  the  country,  but  the  people  are  not  willing  to  permit  any 
legislation  that  will  give  greater  power  to  the  railroads  than  they 
now  possess.  On  the  contrary,  the  people  demand  of  congress  and 
of  state  legislatures  legislation  that  will  protect  them  from  the 
greed  and  rapacity  of  monopolies,  trusts  and  combinations,  which, 
in  my  judgment,  are  a  menance  to  general  prosperity  and  to  the 
liberties  of  the  people. 

Time  will  develop  proper  changes  in  the  act  to  regulate  com- 
merce. Some  amendments  were  pending  during  the  last  session 
of  congress,  which  should  have  been  adopted  and  which  are  recog- 
nized as  wise  by  managers  of  railroads,  as  well  as  by  shippers.  I 
hope  they  will  be  adopted  at  the  next  session  of  congress.  There 
is  a  suggestion  worthy  of  attention  which  I  venture  to  make  here. 
There  seems  to  be  a  rapidly  growing  disposition  among  those  who 
represent  capital  in  this  country  to  dominate  legislation  both  in 
state  and  national  councils.  Capital  has  the  right  to  protect  itself 
against  unjust  legislation  or  any  unjust  policy  of  government,  but 
when  great  corporations  seek  to  place  men  in  legislatures  or  other 
official  positions  to  represent  any  special  interest  instead  of  the  in- 
terests of  the  whole  people,  danger  to  free  government  becomes 
imminent  and  the  people  should  sound  the  alarm. 

I  trust  the  time  may  not  soon  come  in  the  United  States  when 
the  money  power  shall  be  allowed  to  exercise  more  than  its  reason- 
able influence  in  shaping  the  conduct  of  affairs  in  America. 


REPLY  TO  THE  HON.  S.  n.  CULLOM. 

By  G.  R.  Blanchard. 

To  the  Hon.  Shelby  M.  Ciillom^ 

United  States  Senate  : 

Sir  :  Your  article  in  the  last  Railway  Age  entitled  ' '  The  federal 
control  of  railways,"  deserves  attention  because  of  your  long 
and  prominent  legislative  connection  with  the  question  treated, 
the  importance  of  the  subject  and  your  manner  of  discussing  it.  It 
also  deserves  a  frank  reply  because  your  printed  views  of  mutual 
equities  have  not  been  advocated  by  you  in  the  Senate  or  its  com- 
mittees, where  and  when  frequent  opportunities  have  been  af- 
forded you  to  give  them  public  value. 

Your  senatorial  office  and  these  public  utterances  justify  me  in 
addressing  you  direct,  and  I  do  so  with  more  than  the  considera- 
tion and  none  of  the  recent  hostile  intimations  of  some  of  the 
Chicago  press,  although  I  represent  a  larger  constituency,  it  being 
computed  that  nearly  one-fifth  of  the  population  of  the  United 
States  derive  their  support  directly  or  indirectly  from  its  carriers. 

I  do  not  gainsay  the  need  of  a  proper  and  effectual  act.  The 
accumulated  irregularities  of  corporate  carriers  for  30  years  justi- 
fied national  action  to  protect  not  more  the  public  than  contending 
carriers  against  each  other's  folly  under  the  misomer  of  compe- 
tition. It  was,  however,  the  duty  of  the  national  legislators  to  re- 
member, like  statesmen,  that  the  combined  railway  abuses  of  a 
third  of  a  century  were  far  exceeded  by  the  political,  financial, 
commercial  and  international  benefits  which  railways  had  conferred 
upon  the  country  during  their  pioneer  struggles  and  development 
periods. 

You  well  say  that  "  the  world  soon  forgets  past  conditions." 

Nor  do  railway  managements  generally  contest  your  premises 
that  the  proper  "regulation  "  of  interstate  commerce  is  constitu- 
tional. They  do  however  allege  that  regulation  in  its  original  and 
just  sense  is  rapidly  assuming  oppressive  forms  of  restriction,  pa- 
ternalism and  control.  Your  article,  for  example,  is  entitled  **The 
federal  control  of  railways  "  and  you  say :  "The  people  will  never 
relinquish  control  over  the  common  carriers. "     Control  embraces 

Reprinted  from  the  Railway  Age  and  Northwestern  Railroader  of  Apr  ill  21,  1893 


REPLY  TO  THE  HON.  S.  M.  CULLOM.  gy 

more  than  both  regulation  and  restriction,  meaning,  if  anything, 
the  decision  and  direction  of  all  railway  affairs,  including  finances, 
consolidations,  etc.,  as  well  as  their  commercial  transactions.  The 
constitution  did  not  assume  the  right  of  federal  "  control  "  over  in- 
terstate transportation  routes,  some  of  which  then  existed  by  water. 
The  title  of  your  article  is  therefore  assumptive,  yet  it  indicates 
the  drift  of  public  purpose.  The  intent  of  the  builders  of  our  con- 
stitution cannot  be  proven  to  have  been  as  broad  as  "control," 
nor  as  invasive  of  private  rights  as  modern  public  opinion  and  re- 
cent judicial  decisions.  Happily  you  quote  the  Annapolis  constitu- 
tional convention  in  proof  of  my  averment.  That  historical  assem- 
blage declared  one  of  its  objects  to  be  "  to  devise  means  for  the 
lim/orj/i  regulation  oi  trade."  Do  you  regard  the  interstate  act 
as  the  "uniform  regulation  of  trade?"  Do  you  believe  that  had 
this  law  been  presented  to  that  constitutional  body  it  would  have 
adopted  it  as  an  interpretation  of  its  intent  to  uniformly  regulate 
trade?  You  are  doubtless  aware  also  that  the  constitutional  provi- 
sion was  for  both  the  primary  and  final  purposes  of  preventing  a 
state  (and  not  a  carrier)  from  discriminating  against,  or  taxing  or 
refusing  passage  to,  or  embarrassing  the  commerce  of  another 
state.  None  of  these  questions  are  involved  in  our  present  con- 
tention, and  no  railway  is  attempting  such  halts  or  hinderances  to 
commerce.  You  should  not  therefore  confound  trade  regulation 
such  as  is  the  interstate  act  with  "  the  uniform  regulation  of  trade  " 
itself.  No  railway  then  existed  on  earth,  and  the  constitutional 
convention  could  not  have  intended  what  you  intend. 

Contrary  to  the  Annapolis  dictum  and  the  language  of  the  consti- 
tution, the  railways  now  allege  and  prove  that  the  interstate  act 
did  not  seek  to  "regulate  commerce,"  but  only  one  and  a  minor 
element  of  it,  to  wit :  the  proportions  which  railway  charges  bear  to 
the  totals  of  the  commercial  transactions  involved  in  their  trans- 
portation. The  railways  maintain  that  the  act  did  not  even  seek 
to  regulate  that  moiety  uniformly  by  all  carrying  routes,  because 
it  exempted  interstate  carriers  by  lake,  river,  oceans  and  canals. 
All  those  carriers  may  still  change  their  rates,  discriminate  and  pay 
rebates,  etc. ,  at  will,  which  is  clearly  preferential  legislation  and 
not  the  "  uniform  regulation  of  trade  "  nor  the  "regulation  of  com- 
7nerce"  Nor  did  it  regulate  the  interstate  traffic  of  the  telegraph 
or  sleeping  car  or  stage  companies,  etc.  We  allege  and  show  that 
the  interstate  act  did  not  and  could  not  bind  Canadian  carriers  to 
all  our  conditions,  inasmuch  as  the  rates  within  Canada  are  not 
legally  regulated  or  measured  by  the  rates  through  Canada  on 
American  traffic.  We  prove  that  the  act  ignored  the  older  legis- 
lative transportation  experiences  and  enactments  of  other  great 
countries,  in  particulars  requisite  to  the  just,  equitable  and  efficient 
administration  of  the  act.  I  cite  the  uniformity  of  charges  by 
German  governmental  lines  and  their  machinery  for  compelling 
their  observance  as  our  own  government  does  its  customs  tariffs. 


88  REPLY  TO  THE  HON.  S.  M.  CULLOM. 

Also  the  territorial  distributions  of  traffic  in  France,  etc. ,  as  strik- 
ing contrasts  of  national  sense  and  equity  in  kingdoms  when  com- 
pared with  the  prohibitions  of  our  republican  interstate  law  in  the 
same  respects,  although  there  is  greater  need  for  their  action  in 
our  country  of  more  complex  conditions,  etc. 

For  these  major  reasons  it  is  clear  that  the  law  was  devised, 
urged  and  enacted,  not  in  the  spirit  you  now  publish,  that  railway 
investors  * '  must  be  given  an  equal  chance  with  investments  in 
other  enterprises,"  nor  "to  regulate  commerce  "  in  the  old  consti- 
tutional meaning,  but  to  restrict  corporate  rail  carriers  only.  It 
was  enacted  to  curtail  the  rights  of  railway  companies  and  to  en- 
large public  privileges.  Your  article  proves  this  by  its  tenor  and 
its  statements  of  the  causes  which  not  only  justified  the  act  but 
warrant  further  restrictions.  It  is  no  answer  or  justification  of 
these  preferences  and  inequities  of  the  law,  to  charge  that  railways 
had  done  unjustifiable  things.  Clearly  when  the  "  regulation  of 
commerce  "  was  entered  upon  with  presumptive  impartiality,  our 
railways  did  not  lose  their  constitutional  right  to  just  consideration 
by  the  national  congress.  When  that  body  sought  to  "regulate  " 
the  question,  it  should  have  defined,  maintained  and  conceded  that 
which  was  best  for  both  which  harmed  neither.  It  was  only  be- 
cause this  was  not  done  that  the  act  encountered  the  ' '  stubborn 
opposition  "  you  cite.  The  railways  as  well  as  the  country  were 
fully  prepared  for  a  good  and  impartial  act,  but  it  was  a  duty  to 
oppose  its  unfair  conditions  and  omissions  then,  and  is  now. 

Notwithstanding  these  cited  eliminations  of  equal  justice  in  the 
act,  a  great  majority  of  American  railway  companies  accepted  and 
adopted  it  in  good  faith.  It  required  that,  between  February  i  and 
April  I,  1887,  the  transportation  methods  of  sixty  years  should  be 
changed,  and  but  for  the  thorough  co-operation  of  the  large  major- 
ity of  railway  companies  the  measure  would  have  failed  at  its  out- 
set. In  sixty  days  they  conformed  their  enormous  systems  to  an 
untried  and  crude  law  at  large  expense.  It  justified  them  in  ad- 
vancing many  through  rates,  but  they  reduced  local  rates  instead. 
Five  freight  classifications  between  the  Mississippi  and  the  Atlantic 
were  consolidated  into  one.  The  first-class  rate,  Chicago  to  New 
York,  of  $1.00  per  100  pounds  was  reduced  to  75  cents  and  all  the 
upper  class  rates  proportionally.  Rates  were  made  the  same  in 
both  directions.  Fixed  bases  of  rates  generally  replaced  former 
inequalities.  Parallel  waterways  were  untouched  by  the  act  and 
continued  to  be  the  great  minimizers  of  railway  rates,  and  railway 
tariffs  were  adapted  thereto.  Railway  associations  were  re-organ- 
ized to  fit  the  new  law.  Pooling  was  abandoned  in  obedience  to 
law,  not  because  it  should  have  been  prohibited  or  that  it  was  ille- 
gal if  the  rates  themselves  were  legal  and  reasonable. 

The  great  change  was  frictionless  and  undisturbing  to  trade, 
and  those  who  declare  that  railways  did  not  generally  co-operate 
to  fulfill  the  act  speak  in  surmises.     The  railways  did  more  to  give 


REPLY  TO  THE  HON.  S.  M.  CULLOM. 


89 


it  due  effect  than  all  the  combined  trade  bodies,  senators  and  com- 
missioners who  had  pleaded  for  its  passage,  but  your  article  no- 
where recognizes  that  national  fact. 

Trade  organizations,  having  secured  what  they  had  long  sought, 
owed  the  law  the  organized  co-operation  which  they  have  not  yet 
given  it.  On  the  contrary  a  majority  of  the  largest  shippers  have 
continuously  sought  preferences  which  would  vitiate  the  act.  No 
railway  allows  unsolicited  rebates.  They  usually  result  from  ship- 
pers' importunities,  intimations,  threats  to  divert  their  business,  or 
illegal  devices  which  secure  to  them  gains  and  preferences. 

In  1892  the  Trunk  Line  Inspection  Bureau  corrected  130,000 
misdescriptions  of  goods  and  false  weights  on  westbound  traffic 
from  New  York  City  and  Philadelphia  only,  and  the  association  I 
have  the  honor  to  represent  collected  more  than  five  times  its  entire 
expenses  in  189 1  and  '92  by  the  discovery  and  correction  of  ship- 
pers' devices  to  evade  legal  regulations  and  tariffs.  What  would  you 
say  of  the  railroads  if  they  resorted  to  similar  devices  to  defraud  for- 
warders 1 30, 000  times  in  one  year  at  two  cities  on  business  one  way 
only?  Corporations  are  regarded  generally  as  fair  prey  for  indi- 
vidual aggrandizement,  and  no  board  of  trade  of  the  United  States 
is  known  to  have  taken  steps  to  stop  these  devices  or  the  receipt 
of  illegal  rebates  by  its  members  nor  to  protect  those  who  do  not 
receive  them.  Each  of  those  bodies  forbids  cutting  its  own  com- 
mission, storage,  insurance  and  other  rates,  and  if  they  are  violated 
their  members  are  impeached  or  expelled.  Most  of  the  same  gen- 
tlemen who  vote  for  such  expulsions  would  bestow  their  tonnage 
and  applause  upon  the  railway  agents  who,  being  members  of  the 
same  bodies,  violate  the  law,  and  would  regard  their  fellow  mem- 
bers as  justifiably  acute  who  secured  such  illegal  preferences. 

This  is  a  swift  review  of  the  conditions  under  which  the  law  was 
passed  and  put  in  operation  and  which  now  exist. 

It  is  well  known  to  the  interstate  commissioners  that  in  addition 
to  the  failures  of  the  law  in  respects  decided  by  the  courts,  rebates 
and  preferences  have  not  ceased  because  of  the  law.  This  pro- 
ceeds largely  from  inherent  defects  in  the  act.  No  law  built  simply 
upon  the  false  theory  that  all  interstate  railways  and  routes  can 
secure  equal  rates,  can  be  satisfactorily  effective.  Railways  of 
unequal  financial  responsibility,  terminal  facilities,  speed,  regular- 
ity of  transit,  capacity  and  connections  cannot  normally  maintain 
equal  rates,  because  competitive  traffic  gravitates  to  the  stronger 
roads  and  away  from  the  weaker.  Travelers  will  not  use  all  lines 
alike  at  equal  rates  of  fare,  and  the  same  reasons  operate  upon 
their  minds  in  entrusting  their  tonnage  to  different  carriers. 

When  therefore  a  persuasive  shipper  carries  a  large  tonnage  to 
a  competitive  weak  line  it  usually  results  in  some  grant  of  those 
preferences  which  were  made  a  leading  reason  for  the  passage  of 
the  act,  only  they  are  renewed  in  new  and  ingenious  but  concealed 
forms. 


po  REPLY  TO  THE  HON.  S.  M.  CULLOM. 

The  public  good  the  law  has  accomplished  is  therefore  found  in 
two  principal  particulars:  The  long  and  short  haul  clause  has 
corrected  many  unjustifiable  disparities  between  through  and  local 
rates,  which  was  a  chief  contention  for  its  passage,  incidental  to 
which  were  rate  wars,  and  it  has  provided,  as  you  state,  a  tribunal 
before  which  shippers  as  well  as  railways  can  seek  the  mutual  in- 
terposition of  commissioners  of  whose  fairness  no  question  has 
been  suggested.  ' 

Thereafter  the  great  fact  remains  unchallenged  that  the  act  has 
not  stopped  discriminations  and  preferences  in  rates ;  nor  will  it  do 
so  until  competing  railways  have  therein  the  right  of  contract  to 
maintain  only  reasonable  rates. 

The  railway  companies,  fully  appreciating  these  unassailable 
facts  and  conditions,  made  reasonable,  urgent  and  respectful  repre- 
sentation to  the  last  congress,  showing  the  necessity  for  restoring 
the  right  to  pool ;  their  propositions  being  substantially  as  follows : 

1.  That  competing  lines  be  given  the  right  to  divide  their  tonnage  or  earn- 
ings under  contracts,  which  with  the  rates  and  fares  were  to  be  submitted  to 
the  interstate  commission,  and  that  such  agreements  be  enforcible  by  law. 

2.  That  in  effect  the  interstate  commission  license  such  agreement  while  they 
were  used  for  the  legitimate  purposes  set  forth ;  otherwise  they  were  revokable 
at  its  pleasure. 

Can  you  controvert  in  any  particular  the  fairness  and  justice  of 
this  plan  any  more  than  you  can  the  governmental  pools  to  main- 
tain the  equally  just  customs,  postage  or  internal  tax  tariffs?  And 
if  competition  is  the  shibboleth,  why  do  you  not  advocate  that  the 
custom  houses  at  Boston  and  New  York  compete  with  each  other 
as  those  cities  and  their  railways  do? 

The  railway  companies  anticipated  your  concurrence  in  these 
propositions  because  of  your  original  report,  because  six  years  of 
the  law  had  proven  its  inadequacy  in  respects  above  set  forth,  etc., 
and  for  the  following  additional  reasons : 

The  honorable  committee  of  the  senate  which  reported  the  inter- 
state act  interrogated  149  persons  regarding  pools,  discriminations, 
rebates,  concessions,  uniformity  and  stability  of  rates.  Twenty- 
four  of  them  were  railroad  men,  20  were  or  had  been  railroad 
commissioners,  61  represe'nted  mercantile  interests,  16  the  farmers^ 
9  the  manufacturers,  7  the  law,  etc. 

Fifty- five  opposed  pooling,  15  were  ambiguous,  42  favored  pool- 
ing generally,  26  of  whom  favored  the  legalization  of  pools,  and 
41  favored  pools  governed  bylaw.  A  close  study  of  the  testimony 
shows  that  none  of  those  who  opposed  them  offered  adequate  sub- 
stitutes, nor  have  you  offered  one  when  the  subject  was  first  or 
recently  presented  in  the  senate.  * 

Furthermore  the  senate  report  preceding  the  act  and  to  which 
your  name  is  appended  did  not  recommend  the  abolition  of  pools^ 
but  wisely  and  justly  said : 

*  I  am  indebted  to  Vice-President  Stubbs  of  the  Southern  Pacific  Company  for  this  inter- 
esting condensation. 


REPLY  TO  THE  HON.  S.  M.  CULLOM.  pi 

"A  majority  of  the  committee  are  not  disposed  to  endanger  the  success  of 
the  methods  of  regulation  proposed  for  the  prevention  of  unjust  discrimination 
by  recommending  the  prohibition  of  pooling." 

The  act  itself  as  first  presented  to  the  senate  said : 

"The  commission  shall  especially  inquire  into  that  method  of  railway  man- 
agement or  combination  known  as  pooling  and  shall  report  what,  if  any,  legis- 
lation is  advisable  or  expedient  on  the  subject." 

You  were  one  of  that  senate  and  majority  and  six  years'  experi- 
ences have  proved  that  this  majority  was  right  and  that  "  the  suc- 
cess of  the  methods  of  regulation  "  has  been  endangered  and  largely 
nullified  by  the  prohibition  of  pooling.  This  fact  was  recently 
and  incontestably  laid  before  a  senate  committee  of  which  you 
were  still  a  member,  but  your  ballot  was  cast  against  it  in  apparent 
reversal  of  your  former  views,  thereby  creating  an  adverse  major- 
ity of  but  one  a.^ainst  the  just  and  neutral  duty  to  railway  equities 
which  your  article  lauds.  Moreover  why  do  you  omit  to  say  that 
all  but  two  of  the  house  committee  reporting  in  December  last 
favored  this  amendment  ? 

The  fact  is  that  but  for  your  ballot  a  majority  of  the  commerce 
committees  of  both  houses  zvould  have  endorsed  it. 

Can  you  reconcile  this  result  with  those  portions  of  your  present 
article  where  you  say : 

"The  public  cannot  afford  to  do  carriers  an  injustice." 

Also— 

"  The  vast  wealth  invested  in  American  railroads  amounting  to  about  $io,- 
000,000,000,  must  be  given  an  equal  chance  with  investments  in  other  enter- 
prises. No  fair-minded  men  should  seek  to  enforce  by  legislation  a  policy 
which  becomes  injurious  to  any  legitimate  enterprise,  whether  carried  on  by 
individuals  or  corporations." 

You  say  that  the  constitutional  duty  to  regulate  commerce  among 
the  several  states  and  foreign  nations — 

"  Must  be  discharged  in  the  interest  of  the  people  without  fear  or  favor,  fear- 
ing not  to  do  right  by  all,  whether  engaged  in  one  pursuit  or  another,  favoring 
none,  whether  clothed  with  corporate  power  or  in  the  common  walks  of  life. 
Equality  of  rights  is  the  watchward  in  this  coimtry." 

"  These  be  brave  words  "  which  stand  like  silhouettes  against 
your  vote  when  only  this  "equality  of  rights "  was  asked  for.  You 
were  made  fully  aware  before  you  cast  it  that  the  request  for  au- 
thority to  pool  was  coupled  with  conditions  to  secure  the  public 
rights  by  preventing  advances  in  pooled  rates  and  that  no  such  in- 
tent existed.  You  knew  also  that  if  the  rates  were  reasonable 
their  maintenance  by  a  pool  which  would  secure  the  uniformity 
and  stability  which  your  report  commended  was  a  desirable  public 
as  well  as  corporate  end.  You  ascertained  the  views  of  the  inter- 
state commerce  commission,  whose  judgments  your  article  com- 
mends, which  are  well  understood  to  have  been  that  the  provisions 
of  the  bill  presented  met  their  substantial  assent,  and  that  they 
held  the  belief  that  its  passage  would  largely  assist  to  stop  the 
causes  of  many  complaints  before  them.     I  especially  wish  at  this 


92  REPLY  TO  THE  HON.  S.  M.  CULLOM. 

point  to  correct  your  error  of  statement  that  ' '  the  men  engaged 
in  the  railroad  business  do  not  regard  the  repeal  of  the  anti-pool- 
ing provision  of  the  law  as  sufficient  to  give  the  relief  they  desire. " 
It  may  not  have  afforded  all  the  relief  desired,  but  it  was  one  and 
a  universally  desired  relief. 

Did  you  not  think  when  the  act  was  being  amended  in  particu- 
lars to  make  its  enforcement  more  practical  and  just,  such  as  the 
testimony  of  witnesses,  granting  them  immunity,  etc.,  that  the 
mutual  justice  of  which  you  write  demanded  that  railways  be  given 
some  single  privilege  somewhere  between  the  first  and  last  lines  of 
the  act,  especially  as  the  authority  asked  conduced  to  the  stability 
of  rates  much  commended  by  you  ? 

If  that  was  not  the  time  for  the  interposition  of  your  watchword 
"equality  of  rights,"  under  what  circumstantes  and  when  do  you 
think  it  will  be  proper  for  senators  and  other  national  and  state 
legislators  to  utter  it  and  give  an  "  equal  chance  "  to  the  ''vast 
wealth  invested  in  American  railroads? "  May  I  respectfully  ask, 
when  is  it  your  individual  purpose  "  to  favor  none,  whether  clothed 
with  corporate  power  or  in  the  common  walks  of  life  ?  "  When,  in 
your  judgment,  will  be  the  time  when  ' '  no  fair  minded  man  should 
seek  to  enforce  by  legislation  a  policy  which  becomes  injurious  to 
any  legitimate  enterprise,  whether  carried  on  by  individuals  or 
corporations  ?  " 

Can  you  cite  one  legislative  transportation  measure  of  congress 
or  any  state  since  the  granger  legislation  of  1872,  which  gave 
this  ''equal  chance  to  railway  investments?"  which  "favored 
none  in  the  common  walks  "  more  than  railways,  or  which  was 
not  "  injurious  to  legitimate  (railway)  enterprise  ?"  That  you  do 
not  believe  the  time  has  yet  come  for  theoretical  justice  to  be 
given  practical  effect  seems  proven  by  your  recent  votes  and  by 
other  nullifying  words  of  your  article,  such  as  the  following  : 

It  is  urged  with  great  force  that  *  *  *  *  charges  upon  freights  and  pas- 
sengers would  be  increased  as  the  result  of  contracts  under  which  competition 
would  cease. 

Taken  in  the  connection  in  which  this  is  written  the  reverse  of 
each  word  has  been  fully  proven.  You  say  elsewhere  ' '  the  public 
cannot  afford  to  do  carriers  an  injustice  " — yet  you  do  them  great 
injustice  by  the  repetition  of  such  disproven  intimations.  You 
know  that  the  railway  charges  of  this  country  are  the  lowest  in  the 
world  and  that  under  the  pools  existing  prior  to  1887  railway 
freight  charges  were  reduced.  I  proved  this  in  a  public  letter 
addressed  to  you  June  9,  1890. 

Apropos  of  railway  charges  in  your  own  state,  an  English  writer, 
W.  M.  Acworth,  called  attention  in  a  volume  published  in  1891  to 
the  results  of  unrestrained  American  railway  competition  as  fol- 
lows: 

Let  this  one  fact  suffice.  ' '  Between  Chicago  and  Cairo,  a  distance  of  365 
miles,  there  are  22  railway  companies  whose  lines  cross  that  of  the  Illinois  Cen- 
tral.    Eighteen  out  of  22  passed  into  the  hands  of  receivers  since  1874." 


REPLY  TO  THE  HON.  S.  M.  CULLOM.  93 

All  these  railroad  bankruptcies  occurred  while  pooling  was  per- 
missible, and  many  of  the  insolvent  companies  were  parties  to 
pools.  During  the  same  period  land  values  in  the  same  districts 
advanced  greatly.  You  knew  that  the  amendment  urged  last  De- 
cember provided  that  the  pooled  rates  be  more  in  the  hands  of  the 
governmental  commissioners  than  now.  You  knew  it  was  repeat- 
edly averred  by  the  advocates  of  pools  that  no  advanced  tariffs 
would  be  issued.  Presidents  Roberts  and  Depew  and  others  gave 
that  assurance  to  the  house  committee  as  to  rates  between  the  sea- 
board and  the  Mississippi,  where  the  majority  of  the  tonnage  of 
the  country  is  handled.  They  were  mainly  anxious  to  maintain 
the  present  rates  against  the  conditions  I  have  herein  set  forth. 
You  well  knew  also  that  competition  would  not  and  could  not 
cease,  for  the  reasons  clearly  set  forth  in  your  own  and  in  the 
Windom  reports. 

The  Interstate  Commission  cordially  commended  by  you  said  in 
1887: 

"  Excessive  and  unreasonable  competition  is  a  public  injury.  Competition 
is  to  be  regulated,  not  abolished." 

That  is  all  the  railways  sought  to  do  by  the  proposed  law,  and 
if  their  tariffs  are  reasonable  they  are  entitled  to  your  aid  in  main- 
taining them. 

Judge  Deady  of  Oregon  said  before  the  law: 

"  It  is  not  apparent  how  a  division  of  the  earnings  of  two  roads  can  concern 
or  affect  the  public  so  long  as  the  rate  of  transportation  on  them  is  reasonable." 

Judge  Blodgett  of  the  supreme  court  of  New  Hampshire  has 
decided  since  the  law  that  if  such  an  agreement  be  a — 

"  Reasonable  business  arrangement  which  does  not  cause  unreasonably  high 
charges  or  violate  any  duty  which  the  companies  owe  to  the  public  it  should  be 
sustained  and  enforced  by  the  courts." 

England  legalizes  ''joint  purses,"  which  we  call  pools. 

You  do  not  attempt  the  slightest  refutation  of  these  judgments 
and  usages  in  your  dual  generalities. 

Hon.  John  H.  Regan,  after  experience  as  a  railway  commis- 
sioner for  Texas,  contrasts  his  equity  with  yours  by  saying  re- 
cently : 

'•  Further  study  has  caused  me  to  believe  that  the  section  may  be  amended 
so  as  to  benefit  both  the  railroads  and  the  people  by  allowing  railroads  to  enter 
into  traffic  arrangements  with  one  another." 

Further  study  seems  to  have  brought  your  mind  to  the  reverse 
conclusion. 

I  therefore  repeat  my  inquiry :  When  do  you  think  this  much 
vaunted  and  little  achieved  mutual  justice  should  legislatively  be- 
gin? Could  you  not  have  inaugurated  it  in  your  article  by  a  public 
recognition  of  some  of  the  following  uncontrovertable  facts? 

1.  That  the  railways  gave  a  cordial  support  to  the  act  and  that 
their  subsequent  rates  averaged  a  reduction. 

2.  That  there  is  no  general  interstate  tariff  of  the  country  which 
has  been  reduced  by  judicial  decree. 


94  REPLY  TO  THE  HON.  S.  M.  CULLOM. 

3.  That  upon  nearly  all  the  tonnage  carried  in  the  United  States 
the  rates  average  greatly  less  than  those  charged  for  similar  rail 
transportation  in  other  portions  of  the  world. 

4.  That  our  present  rates  do  not  average  one-half  the  charges 
made  15  years  ago. 

5.  That  with  this  decrease  has  come  increased  speed,  responsi- 
bility, security  of  transportation,  absorption  of  lateral  charges, 
stoppage  of  transfers,  etc. ,  unequalled  elsewhere. 

6.  That  with  the  lower  rates  and  quicker  freight  transit  we  pay 
railwav  labor  much  the  highest  railway  wages  of  the  world. 

7.  That  the  basis  of  railway  taxation  is  being  constantly  in- 
creased. 

8.  That  there  were  many  measures  pending  in  the  last  congress 
for  the  restriction  of  railways  and  but  one  for  their  relief,  which 
one  you  assisted  to  defeat. 

9.  That  in  addition  to  the  national  discriminations  I  have  shown, 
there  were  further  countless  national,  state  and  municipal  meas- 
ures pending  for  reductions  of  passenger  fares  or  freight  rates  and 
for  pro  rata  laws,  bills  of  lading,  grade  crossings,  speed  of  trains, 
elevated  tracks  in  cities,  car  couplers,  automatic  brakes  and  safety 
appliances,  the  better  protection  of  labor,  etc. ,  every  one  of  which 
would  have  the  result  to  decrease  the  net  revenues  of  the  railways 
instead  of  giving  impartial  protection  to  railway  investments. 

10.  That  the  public  should  as  justly  pay  for  the  increased  rail- 
way privileges  they  seek  as  they  would  in  any  other  business. 

11.  That  the  cheapest  through  interstate  rail  transportation  of 
the  world  has  been  achieved  without  legislative  enactments. 

12.  That  to  the  railways  has  been  due  the  unparalleled  develop- 
ment of  the  nation  itself  and  the  extension  of  its  foreign  com- 
merce. 

Why  not  only  no  recognition  of  these  facts  by  you,  but  the  rep- 
etition of  mouldy  formulas  that  "cheap  transportation,  etc.,  is  a 
great  demand  of  the  times  ;  "  and  "we  must  give  the  people  the 
best  possible  advantage  in  reaching  whatever  market  may  be  open 
to  them  in  any  of  the  nations, "  and  that  "the  nation  will  fail  of  its 
duty  if  it  does  not  do  what  it  can  to  secure  both  to  the  people?  " 

Does  all  this  mean  to  influence  courts  and  that  congress  is  to 
make  or  limit  the  rates?  If  not,  what  is  its  purport?  You  have  the 
cheapest  rail  transportation  already,  and  the  railways  have  brought 
the  world's  markets  to  our  people. 

I  come  now  to  the  contrary  views  expressed  in  your  article 
where  you  say: 

' '  There  seems  to  be  a  rapidly  growing  disposition  among  those  who  repre- 
sent capital  in  this  country,  to  dominate  legislation  both  in  state  and  national 
councils. 

Capital  has  a  right  to  protect  itself  against  unjust  legislation  or  any  unjust 
policy  of  government,  but  when  great  corporations  seek  to  place  men  in  legis- 
latures or  other  official  positions  to  represent  any  special  interest  instead  of  the 
interests  of  the  whole  people,  danger  to  free  government  becomes  imminent  and 
the  people  should  sound  the  alarm. 


REPLY  TO  THE  HON.  S.  M.  CULLOM.  95 

I  trust  the  time  may  not  soon  come  in  the  United  States  when  the  money- 
power  shall  be  allowed  to  exercise  more  than  its  reasonable  influence  in  shap- 
ing the  conduct  of  affairs  in  America." 

Logicians  will  ask,  if  capital  has  the  right  to  protect  itself  against 
unjust  legislation  or  any  unjust  policy  of  government,  how  it  is  to 
protect  itself  when  such  students  of  the  problem  and  presumptive 
representatives  of  all  interests  as  yourself  do  not  assist  to  protect 
them.  Moreover,  why  should  they  not  seek  to  place  defenders  of 
their  enormous  interests  and  vested  rights  in  congress  and  legis- 
latures to  contend  there  against  those  who  bend  the  ballots  rather 
than  to  justice,  and,  denying  us  any  relief,  accord  all  the  law  to 
those  who  under  various  arguments  and  political  guises  are  elected 
to  the  same  bodies  upon  avowed  platforms  of  corporate  hostility  ? 
Are  our  rights  of  interest,  influence  •  and  election  to  be  made  less 
than  theirs  touching  the  care  and  protection  of  our  own  properties 
and  rights  ? 

Have  you  sounded  any  alarm  that  the  interests  of  the  whole 
people  have  been  endangered  by  the  repeated  legislative  restric- 
tions upon  corporate  bodies  ?  Are  you  aware  of  any  legislative 
body  which  is  dominated  by  corporate  representatives?  Surely 
no  legislation  of  which  I  can  learn  reflects  such  domination  or  even 
a  neutralizing  influence.  The  public  has  a  right  to  expect  of  men 
who  hold  your  high  office,  especially  when  the  tenure  has  been  as 
long  and  full  of  experience  and  repute  as  yours,  that  they  shall 
become  teachers  of  the  right  and  impartial  guardians  and  not 
pleaders  for  the  specious,  under  guises  of  impartiality. 

I  have  scanned  your  article  to  find  but  one  suggestion  of  the 
actual  proposals  you  would  have  inserted  in  the  law  to  accomplish 
the  "  equality  of  rights  "  which  you  suggest  railways  should  re- 
ceive, but  I  do  not  find  any. 

I  do  find  however  such  sentences  as  the  following : 

' '  The  people  demand  of  congress  and  the  state  legislatures  legislation  that 
will  protect  them  from  the  greed  and  rapacity  of  monopolies,  trusts  and  combi- 
nations, which  in  my  judgment  are  a  menace  to  general  prosperity  and  to  the 
liberties  of  the  people." 

Why  did  you  not  point  out  what  greed  and  rapacity  interstate 
carriers  now  exhibit  or  practice  by  charging  the  world's  cheapest 
carrying  rates  and  fares  ? 

I  cannot  refrain,  in  conclusion,  from  quoting  the  following  pas- 
sage from  Cervantes: 

'  'As  they  were  thus  discoursing  they  discovered  some  thirty  or  forty  wind- 
mills *  *  *  and  as  soon  as  the  knight  espied  them  *  *  *  cried  he : 
*'  Look  yonder,  friend  Sancho,  there  are  at  least  thirty  outrageous  giants  whom 
I  intend  to  conquer    *    *    *    for  they  are  lawful  prize.     *    *    * 

"  What  giants  ?"  quoth  Sancho  Panza. 

"  Those  whom  thou  see'st  yonder,"  answered  Don  Quixote,  "  with  their  long 
extended  arms." 

Finally,  I  respectfully  invite  you  to  a  public  discussion  of  these 
issues  before  the  World's  Railway  Congress  which  convenes  in 
Chicago,  June  19th,  or  before  the  Chicago  university,  or  elsewhere 
after  you  shall  have  resumed  private  life. 


LIMITATIONS  UPON  RAILWAY  POWERS. 

Hon.  Augustus  Sclwomnaker^ 

Ex-member  of  the  Interstate  Commerce  Commission. 

The  tendency  of  all  power  is  in  the  direction  of  some  form  of 
abuse.  This  fact  is  as  well  known  as  any  truism  of  human  expe- 
rience. When  power  is  exercised  by  individuals  it  becomes  des- 
potic and  arbitrary.  In  the  case  of  unrestrained  legislative  power 
it  expands  into  waste,  extravagance,  oppressive  taxation,  and 
often  selfish  enactments  for  the  benefit  of  a  few  at  the  expense  of 
the  many. 

In  the  case  of  municipal  power  the  same  abuses  are  developed. 
In  the  case  of  corporate  power  the  temptations  to  abuse  in  its 
exercise  are  even  greater,  for  the  reason  that  private  corporations 
are  organized  for  gain,  and  there  is  no  popular  constituency  to 
hold  their  managers  in  check  by  the  voice  of  the  ballot-box. 

Private  corporations  are  too  often  like  privateers  upon  the  ocean, 
they  become  licensed  freebooters  to  the  extent  of  their  powers, 
and  as  a  rule  their  victims  embrace  the  whole  public,  even  the 
unofficial  proprietors  of  the  corporate  property.  In  no  instance 
of  corporate  misconduct  have  abuses  been  more  flagrant  and  mis- 
chievous than  in  the  case  of  railway  corporations.  The  unjust 
discriminations  in  respect  to  persons,  in  respect  to  traffic  and  in 
respect  to  localities;  the  reckless  construction  and  extension  of 
roads  and  branches  in  advance  of  the  demands  of  business ;  the 
organization  of  subsidiary  corporations  to  absorb  the  resources  of 
enormous  indebtedness  impossible  of  payment  and  ruinous  to 
credit  are  subjects  familiar  to  the  country,  and  form  a  history  of 
unscrupulousness  and  criminality  that  brings  a  blush  of  shame  to 
the  cheeks  of  a  patriot. 

On  account  of  the  universal  tendency  of  power  to  divers  forms 
of  abuse,  society  has  long  found  it  necessary  to  impose  restraints 
and  limitations  upon  its  exercise  in  all  matters  of  government. 
In  nearly  every  State  of  the  Union  the  fundamental  law  limits 
legislative  and  municipal  power  within  certain  prescribed  boun- 
daries, beyond  which  its  enactments  or  resolves  are  void.  In  the 
State  of  New  York,  for  example,  the  prohibitions  upon  legislative 

Reprinted  by  permission  from  The  Independent  of  June  i,  1893. 


LIMITATIONS  UPON  RAILWAY  POWERS. 


97 


power  make  up  the  greater  part  of  the  Constitution.  Nearly  one 
whole  article  consists  of  restrictions  intended  for  the  protection  of 
persons  and  property.  Other  articles  contain  numerous  and  specific 
provisions  prohibiting  legislation  upon  a  large  variety  of  subjects. 
The  power  to  contract  debts  is  greatly  limited ;  appropriations  to 
run  for  more  than  two  years  are  prohibited.  Municipalities  are 
also  under  stringent  limitations  upon  their  powers,  and  in  all  mu- 
nicipal charters  granted  by  the  Legislature  there  are  careful  re- 
strictions upon  the  expenditure  of  money  and  the  creation  of  in- 
debtedness. 

Under  the  charter  of  the  city  of  New  York,  the  greatest  city  of 
the  western  continent,  there  is  scarcely  any  power  whatever  in 
the  municipal  legislative  body,  the  Common  Council.  Even  the 
amount  of  necessary  taxes  to  be  raised  is  determined  by  another 
body  of  men,  the  Board  of  Estimate  and  Apportionment.  This  is 
under  a  provision  of  the  Constitution  to  the  effect  that  it  shall  be 
the  duty  of  the  Legislature  in  providing  for  the  organization  of 
cities  and  incorporated  villages  "  to  restrict  their  powers  of  taxa- 
tion, assessment,  borrowing  money,  contracting  debts  and  loan- 
ing their  credit,  so  as  to  prevent  abuses  in  assessments  and  in 
contracting  debt  by  such  municipal  corporations." 

These  rigid  and  manifold  limitations  have  sprung  from  the 
danger  of  unrestrained  power,  as  shown  by  long  years  of  expe- 
rience, and  their  salutary  effect  has  approved  the  wisdom  of  their 
adoption. 

The  limitations  that  have  been  found  necessary  in  representa- 
tive government  to  prevent  abuses  of  power,  are  equally  neces- 
sary in  the  case  of  private  corporations.  They  are  especially 
appropriate  and  urgent  in  the  case  of  railway  corporations,  which 
are  universally  recognized  as  public  in  their  character,  and  have 
some  of  the  highest  prerogatives  of  government  delegated  to  them, 
such  as  the  power  of  eminent  domain,  and  the  taxing  power,  in 
the  form  of  tolls  and  charges.  The  right  of  the  Government  to 
limit  the  power  of  these  corporate  bodies  is  tmquestionable,  and 
is  derived  in  part  from  the  fact  that  they  are  mere  creatures  of 
Government,  either  State  or  Federal,  and  in  part  from  the  business 
in  which  they  are  engaged  which  is  affected  with  a  public  interest 
and  therefore  subject  to  public  control.  Governments  are  organ- 
ized primarily  for  general  defense,  and  for  the  protection  of  per- 
sons and  property  with  all  the  rights  and  incidents  that  pertain  to 
them. 

Further  objects  of  government  of  equal  importance  are  the 
regulation  of  public  or  quasi-public  organizations  or  combinations, 
to  bring  them  under  the  supervision  of  public  authority  and  the 
control  of  law,  and  prevent  depredations  upon  the  public,  and 
restrain  the  growth  of  a  power  representing  vast  financial  and 
property  interests  that  may  become  threatening  to  the  public 
safety. 


98  LIMITATIONS  UPON  RAILWAY  POWERS. 

The  railway  interests,  which  in  many  respects  are  a  unit,  con- 
stitute a  power  of  this  character,  which  must  either  be  held  in 
subjection  to  governmental  authority,  or  will  itself  control  in  a 
large  measure  the  legislative,  judicial  and  administrative  depart- 
ments of  the  Government. 

A  careful  analysis  and  truthful  account  of  the  extent  to  which 
railway  influences  enter  into  the  action  of  different  departments 
of  the  Government  would  surprise  many  patriotic  people,  who 
solace  themselves  with  the  optimistic  creed  that  '  'whatever  is,  is 
right." 

Not  a  few  seats  in  legislative  bodies  have  long  been  occupied  to 
represent  railway  interests,  and  the  same  influence  can  be  traced 
in  every  branch  of  the  public  service.  In  a  few  States  it  is  said  a 
railway  party,  or  party  of  railway  employes,  exists  strong  enough 
to  control  popular  elections.  The  railway  interests  of  this  country 
represent  untold  billions  of  capital,  and  an  available  voting  force 
of  a  million  or  upward  of  men.  If  this  immense  organized  and 
disciplined  body  with  all  its  vast  resources  were  of  a  military  char- 
acter, it  is  probable  that  it  would  excite  some  alarm  in  even  the 
strongest  government  on  earth. 

There  are  reasons  of  a  general  character,  therefore,  plain  to  the 
understanding  of  every  one  and  apart  from  the  economic  reasons 
that  are  alone  sufficient,  why  limitations  should  be  placed  upon 
the  powers  of  railway  corporations.  Special  interests  will  always 
strive  for  representation  under  all  forms  of  government,  but  par- 
ticularly in  a  republic.  There  is  no  objection  to  such  represent- 
ation so  long  as  it  is  open  and  avowed,  but  danger  lurks  in  dis- 
guised representation  and  influences  exerted  under  cover. 

The  limitations  in  view  in  this  paper,  however,  have  reference 
to  corporate  powers  solely,  and  not  to  the  sphere  in  which  repre- 
sentation is  sought  and  influences  exerted  in  favor  of  corporate 
interests. 

National  banks  furnish  an  illustration  of  limitations  and  safe- 
guards upon  corporate  powers.  The  Banking  Act  is  full  of  re- 
strictions upon  such  institutions  and  provisions  to  protect  the  pub- 
lic who  deal  with  them.  No  bank  can  incorporate  itself,  or  issue 
bills  in  its  own  discretion,  or  transact  business  not  embraced  within 
the  objects  of  its  incorporation.  There  must  be  governmental 
authorization  of  the  bank ;  bill  holders  must  be  secured  by  a  de- 
posit with  the  Government  of  adequate  security ;  the  circulation  is 
limited;  a  reserve  fund  must  be  maintained;  the  stockholders  are 
liable  to  creditors  to  the  extent  of  the  stock  they  hold ;  officers 
and  directors  are  restricted  as  borrowers;  Government  officials 
make  stated  examinations  to  ascertain  the  condition  of  the  bank. 
In  case  of  impairment  the  Government  takes  possession,  and  if 
liquidation  must  take  place  the  Government,  through  its  own  re- 
ceiver, administers  the  fund.  In  short,  the  system  of  regulation 
is  complete  and  covers  the  whole  ground,  from  the  organization 


LIMITATIONS  UPON  RAILWAY  POWERS.  99 

of  the  bank,  through  all  its  operations  and  to  its  final  liquidation. 

Suppose  some  such  provisions  were  applied  to  railroad  corpora- 
tions, would  there  be  so  many  unnecessary  and  speculative  rail- 
roads? Would  two-thirds  of  the  stock  and  many  of  the  bonds  of 
railroads  of  the  country  be  worthless  as  investments?  and  would 
more  than  two  dozen  companies,  representing  upward  of  eighty 
millions  of  capital,  go  into  the  hands  of  receivers  in  one  year  from 
inability  to  meet  their  obligations? 

If  it  be  said  that  national  banks  are  chartered  by  the  govern- 
ment, and  that  they  are  therefore  national  institutions,  and  the 
government  may  impose  upon  them  any  restrictions  deemed  ap- 
propriate, it  is  a  sufficient  reply  that  railroads,  whether  chartered 
by  the  national  or  the  state  governments,  are  also  national  insti- 
tutions by  reason  of  the  business  in  which  they  are  engaged. 

The  doctrine  is  undisputed  that  railroads  are  public  highways 
of  commerce,  and  the  Government,  instead  of  constructing  and 
operating  them  itself,  delegates  its  powers  to  private  corporations 
to  perform  this  function,  because  it  is  deemed  better  public  policy. 

The  Government  having  exclusive  control  over  interstate  com- 
merce and  of  all  the  agencies  and  instrumentalities  by  which  it  is 
carried  on,  its  authority  to  require  a  railroad  to  procure  an  authori- 
zation to  engage  in  interstate  commerce  is  as  full  and  complete  as 
its  authority  in  the  case  of  a  bank  to  engage  in  the  banking  busi- 
ness, and  it  has  equal  authority  to  attach  such  conditions  to  the 
authorization  as  the  governing  body  may  see  fit  to  prescribe. 

We  are  thus  brought  to  a  consideration  of  some  of  the  limita- 
tions that  public  policy  seems  to  require  upon  railway  powers. 

The  first  limitation,  obviously,  should  be  upon  the  organization 
of  companies  and  the  construction  of  new  roads  and  the  extension 
of  existing  roads.  An  authorization  should  in  all  cases  be  neces- 
sary for  the  organization  of  a  railway  company,  and  for  the  con- 
struction or  extension  of  a  road.  The  promoters  of  a  railway 
should  not  be  the  sole  judges  of  its  necessity  or  the  propriety  of 
its  creation.  A  common  highway  or  private  roadway  in  a  country 
district  cannot  be  laid  out  without  the  action  of  the  public  authori- 
ties. If  a  new  road  is  projected  for  which  no  public  demand  exists, 
and  which  can  only  have  a  precarious  career  of  its  own  by  work- 
ing harm  to  established  roads,  it  has  no  just  claim  to  come  into 
being.  And  the  same  principle  applies  to  improvident  extensions 
into  territory  already  adequately  served  when  the  necessary  effect 
must  be  only  to  divert  business  from  competitors.  Competition 
in  such  cases  is  not  a  benefit,  but  an  injury.  It  is  a  sound  rule  in 
railroad  construction  that  whatever  road  is  useless  is  detrimental 
to  existing  roads  and  to  the  public. 

Can  any  one  believe  that  eight  or  nine  competing  lines  between 
Chicago  and  St.  Paul  would  be  in  operation,  when  three  are  suf- 
ficient for  the  business,  if  an  authorization  had  been  required? 
Would  half  a  dozen  unprofitable  trans-continental  lines  have  been 


loo  LIMITATIONS  UPON  RAILWAY  POWERS. 

brought  into  losing  competition  when  perhaps  two  might  have 
maintained  a  solvent  existence?  Or  would  similar  conditions  exist 
in  any  other  territory  if  limitations  upon  improvident  and  unnec- 
cessary  construction  were  in  force? 

What  enormous  losses  of  capital  might  have  been  averted;  what 
disappointment  and  distress  on  the  part  of  investors  prevented; 
what  unnumbered  frauds,  violations  of  law  and  principles  of  jus- 
tice, and'  criminal  artifices  to  get  business,  would  have  had  no  in- 
ducement; what  public  and  private  dishonor  would  have  been 
avoided,  under  the  working  of  suitable  limitations  on  construction, 
can  never  be  estimated ;  but  as  cause  and  effect  must  always  co- 
exist, had  not  the  principal  cause  of  these  evils  existed,  their  vol- 
ume would  have  been  immeasurably  less. 

If  railways  were  only  private  affairs  and  a  man  could  own  and 
operate  his  own  road,  as  he  uses  his  carriage  and  horses,  the  pub- 
lic would  have  no  concern  in  them ;  but  as  they  are  public  agencies, 
and  the  public  is  profoundly  interested  in  them,  both  as  to  the 
service  they  render  with  the  charges  made  for  the  same,  and 
also  their  solvency,  they  are  matters  of  the  greatest  public  import- 
ance. 

Closely  allied  to  a  limitation  upon  new  construction  is  a  limitation 
in  the  form  of  authorization  to  engage  in  interstate  commerce. 
This  simple  expedient  would  accomplish  two  important  objects. 
It  would  be  the  most  efficient  method  of  regulation  in  checking 
transportation  abuses,  inasmuch  as  revocation  of  a  license  might 
follow  violation  of  established  rules ;  and  it  would  bring  every  im- 
portant road  in  the  country  under  the  jurisdiction  of  the  Federal 
authorities,  as  no  such  road  could  afford  to  lose  interstate  business. 

Another  limitation  of  the  greatest  importance  is  a  restriction 
upon  the  debt-creating  power  of  railways.  The  chief  trouble 
with  railways  is  the  latitude  and  profligacy  with  which  debts 
are  incurred,  whether  in  the  form  of  bonds  or  current  obliga- 
tions. The  interest  to  be  met  upon  indebtedness  produces  a  ne- 
cessity for  revenue,  and  business  to  secure  revenue  sufficient  for 
operating  expenses,  fixed  charges  and  necessary  improvements 
must  be  had,  by  fair  means  or  foul.  Higher  rates  are  also  essen- 
tial than  would  otherwise  be  required,  and  if  established  rates  will 
not  bring  sufficient  business,  the  temptation  to  invite  business  by 
secret  or  cut  rates  and  other  devices  is  to  great  to  be  resisted.  If 
railroads  were  not  built  almost  exclusively  upon  credit,  if  the 
original  debt  for  construction  were  not  constantly  increased  for  all 
manner  of  purposes,  good  and  bad,  if  the  funded  debt  of  the  rail- 
way were  not  a  permanent  part  of  the  enterprise,  what  a  different 
condition  American  railways  would  present!  Their  rates  could  be 
largely  reduced,  lessening  the  burdens  upon  commerce,  and  their 
bonds  and  stocks  would  have  a  known  and  permanent  value  as  in- 
vestments. 

The  free  and  easy  methods  for  organizing  railroad  companies 


LIMITATIONS  UPON  RAILWAY  POWERS.  loi 

and  endowing  them  with  prerogatives  of  sovereignty  in  most  of  the 
States  are  a  pubHc  reproach.  In  New  York  a  subscription  to 
capital  stock  of  ten  thousand  dollars  a  mile,  and  payment  on  its 
capital  stock  of  one  thousand  dollars  a  mile,  are  all  that  is  neces- 
sary to  start  one  of  these  corporations  on  its  career  as  an  agency 
of  Government,  and  to  license  it  as  a  snare  and  delusion  to  the 
public,  a  solicitor  of  public  confidence  figuratively  without  "  purse, 
wallet  or  shoes." 

The  result  is  inevitable.  A  debt-burdened  corporation  from  the 
outset,  speedy  bankruptcy,  foreclosure,  heavy  losses  to  bond- 
holders, wiping  out  of  stock  and  reorganization  with  a  larg3r  capi- 
talization and  greater  financial  burdens  than  at  first. 

If  solvency  of  the  corporation  were  the  prime  object  from  the 
beginning,  secured  by  proper  limitations  upon  the  borrowing  and 
debt-contracting  power,  these  results  could  not  happen,  and  there 
would  be  less  competing  roads,  for  mere  speculative  enterprises 
could  not  flourish. 

Another  safeguard  against  the  debt-contracting  tendency  of 
railway  corporations  might  be  to  provide  a  personal  liability  on 
the  part  of  officers  and  directors,  and  perhaps  stockholders,  to 
their  creditors  for  at  least  any  excess  beyond  specified  limits,  as 
in  the  case  of  banks  and  some  private  corporations.  No  measure 
would  be  more  likely  to  insure  conservative  expenditure  and  man- 
agement than  certainty  of  pecuniary  liability  for  recklessness  and 
improvidence. 

Another  limitation  upon  railway  powers  can  properly  be  applied 
to  the  use  of  private  cars  of  shippers  and  special  cars  for  passen- 
ger traffic.  Illustrations  of  this  practice  may  be  found  in  the 
Standard  Oil  Tank  Cars,  and  the  Pullman  Palace  and  Sleeping 
Cars.  These  organizations  which  exact  compensation  in  the  form 
of  mileage  from  railroads  for  the  use  of  their  cars  have  accumu- 
lated enormous  wealth,  while  many  of  the  railroads  that  served 
them,  and  whose  pliant  creatures  they  have  been,  have  gone  into 
bankruptcy. 

The  disadvantages  to  railroads,  the  exhaustion  of  revenue,  the 
inducements  for  officials  of  roads  to  become  interested  in  such  out- 
side organizations,  and  the  discriminations  and  other  abuses  in- 
flicted on  the  public  from  the  use  of  private  cars  owned  by  com- 
panies of  various  kinds  organized  to  make  a  profit  out  of  railroads 
and  railroad  patrons,  have  for  some  time  excited  a  wide  measure 
of  attention  and  are  of  serious  importance.  A  railroad  should  own 
the  equipment  it  employs  in  its  business,  except  that  freedom  of 
interchange  of  equipment  between  roads  should  exist  and  should 
be  compulsory.  If  a  railroad  cannot  afford  to  equip  its  line  with 
rolling  stock  and  supply  its  customers,  equally  it  is  not  prepared 
to  engage  in  business  as  an  agency  of  Government,  and  is  not 
ready  to  become  a  common  carrier.  It  is  better  that  such  a  road 
should  wait  to  become  a  competitor  with  other  roads  adequately 


I02  LIMITATIONS  UPON  RAILWAY  POWERS. 

supplied  to  meet  the  demands  of  the  public,  than  to  permit  it  to 
enter  into  partnership  with  shippers  or  speculative  enterprises 
from  which  evils  of  more  or  less  consequence  must  result  to  the 
public  and  to  the  roads  themselves. 

Another,  and  one  of  the  most  important  limitations  upon  rail- 
way powers,  is  a  restriction  upon  the  dangerous  and  destructive 
power  of  unregulated  competition  in  rates.  This  power,  now  un- 
der no  legal  restraint,  and  shielded  by  popular  misconception,  is 
prolific  in  abuses,  and  is  a  terror  to  conser\'ative  roads  and  more  dis- 
astrous to  all  railway  interests,  perhaps,  than  any  other.  Theoreti- 
cally, every  road  has  a  legal  right  to  establish  its  own  rates  without 
regard  to  the  schedule  charges  of  other  railroads  or  of  their  neces- 
sities for  revenue.  Practically,  however,  there  must  be  comity 
between  roads  and  with  the  long  distance  that  traffic  is  carried  in 
this  country  and  the  interchanges  between  numberless  connecting 
lines,  there  must  be  some  uniformity  in  classification  and  rate 
schedules.  To  this  end  agreements  are  entered  into  and  rate  as- 
sociations maintaiaed ;  but  they  are  in  general  of  little  avail,  for 
with  the  possession  of  the  power,  and  powerful  inducements  for 
its  exercise,  and  no  serious  penalties  for  its  abuse,  the  power  to 
act  independently  will  be  used. 

Volumes  have  been  written  upon  the  evils  of  competition ;  mil- 
lions of  dollars  have  been  spent  upon  compacts  between  railroads 
in  futile  attempts  to  regulate  competition ;  and  millions  more  are 
sacrificed  ever}'  year  in  the  strifes  of  ruinous  competition.  But 
the  evil  will  go  on  until  the  power  that  works  the  mischief  is 
brought  into  subjection. 

The  practical  question  is  how  to  limit  this  power  of  reducing  and 
changing  rates  at  will,  and  it  is  the  most  difficult  of  all  the  railway 
problems.  It  woidd  seem  that  a  Government  authorization  or 
license  to  a  road  to  engage  in  interstate  commerce,  might  in  some 
degree  furnish  a  remedy.  The  license  might  specify  as  a  condi- 
tion, maximum  and  minimum  rates,  or  might  require  traffic  to  be 
carried  at  rates  fixed  from  time  to  time  by  some  association  or 
designated  authority,  to  be  always  subject,  however,  as  to  their 
general  and  relative  reasonableness  and  freedom  from  unjust  dis- 
crimination to  the  proper  pubHc  tribunals  of  the  country.  Further 
provision  might  be  made  to  tax  the  business  of  any  road  attempt- 
ing to  engage  in  or  handle  interstate  commerce  without  a  Govern- 
ment license  to  such  an  extent  as  to  be  prohibitor}'. 

If  authority  were  also  added  for  Government  agents  to  examine 
the  books  and  accounts  of  railway  companies,  as  in  the  case  of 
banks,  and  in  sufficiently  flagrant  cases  to  take  possession  of  the 
property  through  a  receiver  appointed  by  some  proper  authority, 
a  check  would  seem  to  be  created  upon  the  power  in  question 
which  might  to  a  large  extent  prove  effectual. 

The  foregoing  are  some  of  the  powers  of  railways  upon  which 
limitations  would  be  in  the  public  interest,  and  be  in  harmony 
with  the  experience  of  mankind. 


LIMITATIONS  UPON  RAILWAY  POWERS.  103 

How  far  existing  systems  of  regulation  fall  short  of  efficient  con- 
trol of  the  subject  is  obvious.  Under  its  broad  and  sovereign 
power  to  regulate  commerce,  all  that  Congress  has  attempted  to 
regulate  is  transportation,  leaving  the  causes  of  demoraUzation 
and  of  abuses  untouched.  A  requirement  that  rates  shall  be  rea- 
sonable, that  roads  shall  not  unjustly  discriminate  in  respect  to 
persons,  traffic  or  localities,  that  reasonable  and  equal  facilities 
shall  be  afforded  for  the  interchange,  receiving,  delivering  and 
forvs'arding  of  traffic,  together  with  the  creating:  of  a  commission 
to  make  investigations  and  report  recommendations  to  be  enforced 
or  rejected  by  the  courts  of  the  United  States  in  their  discretion, 
and  a  provision  that  roads  shall  make  annual  reports  concerning 
their  condition  and  business,  is  the  sum  of  Federal  regulation. 
The  whole  field  of  unrestrained  and  overgrown  railway  powers,  in 
which  the  rankest  evils  have  their  origin,  remains  in  a  state  of 
nature.  Regulation  will  only  become  what  it  should  be  when  it 
covers  the  whole  field,  and  lays  its  correcting  ax  at  the  root  of 
existing  evils.  Incidentally  the  tribunal  to  pass  upon  questions 
arising  under  the  regulating  laws  should  be  strictly  a  judicial  body, 
as  in  England,  without  being  over- weighted  with  administrative 
duties ;  and  its  decisions  should  only  be  re\'iewable  upon  questions 
of  law  by  the  highest  appellate  tribunal,  the  Supreme  Court. 

The  administrative  duties  of  regulation  are  important  enough 
and  vast  enough  to  be  devolved  upon  a  Cabinet  minister  charged 
solely  with  the  performance  of  that  task,  and  to  him  all  statistical 
reports  should  be  made,  and  he  in  return  should  report  the  statis- 
tical abstracts  for  the  information  of  Congress  and  the  country. 

If  it  be  objected  that  much  of  this  paper  is  the  old,  old  story, 
the  fact  is  conceded.  Iteration  is  doubtless  monotonous,  but  in 
the  field  of  governmental  and  economical  reforms,  **line  upon 
line  and  precept  upon  precept "  are  as  necessarj'  as  in  the  realms 
of  morals.  Public  sentiment  must  lead  the  way  in  all  reformatory 
movements.  Legislation  never  moves  faster  than  public  senti- 
ment, and  under  our  ever  changing  legislative  bodies,  the  law- 
makers of  today  are  mostly  different  from  those  of  yesterday,  and 
those  of  tomorrow  will  again  be  different.  The  work  of  present- 
ing facts  and  arguments  to  those  who  create  laws  and  formulate 
policies  of  government,  has  to  be  done  over  and  over  again  with 
patient  perseverance. 

Kingston,  N.  Y. 


RAILWAY  LEGISLATION. 

Hon.  Walter  D.  Dabney. 

A  correct  diagnosis  of  disease  is  the  first  essential  to  its  success- 
ful treatment.  This  truth  applies  with  no  less  force  to  disorders 
and  defects  in  the  operation  of  economic  systems,  such  as  a  coun- 
try's means  of  transportation,  than  it  does  to  the  maladies  of  the 
human  body.  A  condition  precedent  to  such  a  diagnosis  is  thorough 
knowledge  of  the  system  or  body  in  which  the  disease  is  manifested 
and  of  the  laws  by  which  its  workings  are  governed.  If  this  sys- 
tem is  composed  of  many  different  parts,  members,  or  groups,  the 
requisite  knowledge  must  extend  to  the  internal  structure  and 
arrangement  of  each  group  and  the  local  laws  governing  the  same, 
as  well  as  to  the  structure  and  functions  of  the  system  as  a  whole 
and  the  laws  governing  the  whole.  This  is  particularly  true  if  the 
different  groups  of  the  system  have  had  their  origin  and  develop- 
ment under  conditions  of  comparative  isolation  from  other  groups 
and  under  laws,  both  economic  and  statutor}',  peculiar  to  them- 
selves. As  the  different  and  once  comparatively  independent 
groups  become  unified  into  a  homogeneous  whole,  the  local  laws 
applying  in  each  may  be  found  more  or  less  in  conflict  with  the 
general  law  which  from  the  accomplished  fact  of  unification  has 
become  a  necessity. 

These  remarks  have  been  made  as  preliminary  to  a  plea  for  a 
thorough  study  of  the  railway  laws  of  the  several  States  of  the 
Union  in  their  bearing  and  effect  upon  the  operation  and  enforce- 
ment of  the  national  act  to  regulate  commerce,  and  also,  it  may 
be  added,  of  ascertaining  whether  the  latter  may  not  be  suscepti- 
ble of  improvement  in  certain  particulars. 

A  systematic  study  of  local  laws,  or,  more  properly,  of  the  atti- 
tude of  the  different  States  towards  carriers  engaged  in  transpor- 
tation within  their  limits — for  frequently  this  attitude  is  most 
clearly  shown  by  the  absence  of  any  regulative  legislation — is  the 
prime  requisite  to  the  attainment  of  what  the  resolution  of  March 
1889,  shows  to  be  one  of  the  leading  purposes  of  this  Convention, 
viz.,  "perfecting  uniform  legislation  and  regulation  concerning 
the  supervision  of  railroads." 

Reprinted  from  Proceeding  of  National  Convention  of  Railroad  Commissioners  held  at 
Washmg^ton,  D.  C,  April,  1892. 


RAILWAY  LEGISLATION.  105 

The  effect  upon  national  legislation  of  the  attitude  of  the 
individual  states  towards  the  railway  carriers  within  their  limits, 
I  believe,  will  be  found  to  be  far  more  considerable  than  is  com- 
monly supposed.  The  States'  failure  to  co-operate  may  result  in 
practically  defeating  in  many  important  particulars  the  objects 
sought  to  be  accomplished  by  the  enactment  of  Federal  laws  upon 
this  subject.  Without  any  such  design  on  the  part  of  the  States, 
their  local  laws  and  regnlations,  or,  more  usually,  the  mere  ab- 
sence of  state  regulations,  may  operate  to  greatly  impair  the  ef- 
fectiveness of  the  commercial  laws  and  regulations  of  the  Union. 
The  actual  situation  discloses  various  instances  of  unintentional, 
though  no  less  complete  nullification  of  Federal  law,  resulting 
from  the  action,  or  rather  the  non-action,  of  a  single  State. 

Unlike  the  doctrine  of  nullification  by  a  State  of  Federal  laws, 
once  held  by  some  as  a  political  creed,  the  more  important 
results  of  this  modern  anomaly  are  frequently  manifested  beyond 
the  limits  of  the  State  which  actually  or  passively  has  occasioned 
it. 

This  is  strikingly  illustrated  by  the  fact  that  the  Interstate  Com- 
merce Commission,  verj^  soon  after  its  organization,  found  it  nec- 
essary to  announce  the  principle,  which  has  been  consistently  ad- 
hered to,  that  the  competition  of  a  railroad  carrj-ing  traffic  between 
points  in  the  same  State  might  justify  its  rivals  in  taking  in- 
terstate traffic  without  regard  to  the  general  rule  of  the  4th  sec- 
tion of  the  act  in  respect  to  long  and  short  hauls.  It  cannot  be 
doubted  that  this  ruling  of  the  Commission  was  wise.  Under  the 
existing  law,  indeed,  which  expressly  excludes  from  its  provisions 
transportation  confined  within  a  single  state,  the  ruHng  was  abso- 
lutely essential  to  the  protection  of  interstate  roads  competing 
with  the  State  road. 

And  yet — without  expressing  any  opinion  as  to  the  wisdom  of 
the  purpose — it  may  be  confidently  asserted  that  Congress  intended 
by  the  4th  section  of  the  law  to  declare  as  a  general  regulation  of 
commerce  by  railroads,  subject  to  as  few  exceptions  as  possible, 
the  prohibition  of  a  greater  charge  for  a  shorter  than  for  a  longer 
haul. 

It  could  hardly  have  been  contemplated  that  this  general  princi- 
ple of  regulation  might  be  nullified,  as  in  effect  it  sometimes  has 
been,  by  the  attitude  of  the  indixndual  States  towards  carriers 
within  their  own  limits ;  and  does  it  not  seem  probable  that  Con- 
gress, had  its  attention  been  clearly  directed  to  the  intimate  and 
ine\4table  effect  upon  the  interstate  commerce  of  unregulated 
commerce  within  state  limits,  would  either  have  greatly  extended 
the  general  scope  of  the  Federal  law  or  else  have  modified  in  im- 
portant particulars  the  provisions  of  the  4th  section  thereof  ? 

But  the  effect  produced  upon  interstate  commerce  by  the  action 
of  carriers  within  a  single  state  in  transportation,  subject  only  to 
the  laws  of  that  state,  is  by  no  means  confined  to  the  case  of  di- 


io6  Railway  legislation. 

rectly  competing  carriers,  having  one  or  both  termini  of  their 
routes  in  common.  It  exists  and  is  potent  and  sometimes  seri- 
ously disturbing  under  circumstances  where  yet  it  may  not  be  suf- 
ficiently direct  to  secure  recognition  as  a  justification  for  departing 
from  the  general  rule  of  the  long  and  short  haul. 

An  illustration  of  the  disturbing  influence  which  roads  engaged 
in  transportation  between  points  in  the  same  State  might  exert 
upon  numerous  other  roads  engaged  in  interstate  commerce  be- 
tween points  in  other  States  is  found  on  the  one  hand  in  the  lines 
connecting  St.  Louis  with  Kansas  City,  both  in  the  same  State,  and 
on  the  other  hand  in  the  lines  connecting  Chicago  with  Omaha 
and  other  cities  on  the  Missouri  river,  in  Nebraska,  Iowa,  Kansas 
and  Missouri.  The  pressure  of  commercial  forces  operating 
throughout  many  years  has,  after  repeated  conflicts,  resulted  in  a 
certain  agreed  percentage  of  difference  between  the  railroad  rates 
from  eastern  points  to  Chicago  and  St.  Louis  respectively,  the  lat- 
ter being  charged  a  somewhat  higher  rate  from  the  east  than  the 
former. 

In  obedience  to  a  commercial  necessity  which  experience  has 
proven  to  be  irresistible,  the  rates  from  Chicago  to  all  points  on 
the  Missouri  river  from  Kansas  City  to  Omaha,  inclusive,  are 
made  greater  by  a  fixed  percentage  than  the  rates  from  St.  Louis 
to  the  same  points,  and  all  these  points  have  the  same  rates  from 
Chicago  and  the  same  rates  from  St.  Louis.  A  disturbance  of  this 
adjustment  in  the  rates  from  either  Chicago  or  St.  Louis  to  either 
Kansas  City,  Omaha,  or  any  intermediate  Missouri  River  point 
has,  whenever  attempted,  introduced  serious  trouble,  confusion, 
rate  wars,  and  discriminations  injurious  alike  to  the  interests  of 
shippers  and  of  carriers,  through  the  whole  region  between 
Chicago  and  the  Missouri  river.  No  detailed  explanation  of  the 
causes  to  this  fact  need  be  entered  upon  here.  As  a  fact  it  is  per- 
fectly well  established.  The  rate  from  St.  Louis  to  Kansas  Cit)^ 
for  instance,  if  these  general  evils  are  to  be  avoided,  must  be 
maintained  at  a  uniform  ratio  to  the  rate  from  Chicago  to  Omaha. 
Secret  rebates  from  the  published  rate  from  St.  Louis  to  Kansas 
City  will,  if  long  continued  and  applied  to  any  considerable  and 
important  line  of  traffic,  inevitably  affect  injuriously  the  roads 
carrying  the  same  line  of  traffic  between  Chicago  and  Omaha.  A 
resort  to  rebates  or  other  devices  to  retain  their  business  is  for- 
bidden by  the  interstate  commerce  act  to  the  latter  roads ;  but  the 
lines  carrying  between  St.  Louis  and  Kansas  City,  the  transporta- 
tion being  confined  within  the  limits  of  a  single  State,  are  not  re- 
stricted in  this  respect  by  Federal  law.  Unless  the  State  of  Mis- 
souri forbids  by  law  the  use  by  carriers  of  rebates  and  other  similar 
devices  to  secure  traffic,  it  is  plain  that  the  voluntary  self-restraint 
of  the  Missouri  roads  can  alone  be  relied  on  to  preserve  a  status  of 
justice  and  commercial  equilibrium  throughout  a  vast  territory 
wholly  beyond  the  borders  of  that  state.     Fortunately  through 


RAILWAY  LEGISLATION.  *  107 

the  medium  of  the  railway  associations  the  self-restraint  necessary 
to  maintain  the  proper  equilibrium  has  generally  of  late  years  been 
practiced — at  least  in  the  territory  which  has  been  referred  to  in 
illustration ;  but  it  is  evident  that  the  absence  of  state  laws  in  har- 
mony with  Federal  laws  may  very  likely  result,  if  not  in  complete 
nullification  of  Federal  laws,  at  least  in  rendering  them  far  more 
difficult  of  enforcement  than  they  would  be  if  aided  by  harmonious 
state  legislation.  A  railway  carrier  of  interstate  traffic  is  not  likely 
under  ordinary  circumstances  to  render  other  than  a  compulsory 
obedience  to  law  when  obedience  affords  the  opportunity  to  other 
carriers  not  subject  to  legal  restrictions  to  take  away  its  business 
by  resorting  to  devices  which  the  law  forbids  to  it. 

Another  respect  in  which  state  laws  and  regulations  may,  though 
confined  in  terms  to  business  wholly  within  a  single  state,  h^ve  a 
decided  bearing  on  interstate  business,  is  through  the  fixing  of 
maximum  rates  either  directly  by  state  laws  or  by  state  commis- 
sions. 

The  reasonableness  of  a  carrier's  rates  on  interstate  business 
must  depend  to  some  extent  upon  the  amount  of  the  carrier's  earn- 
ings from  all  its  business.  Where  a  line  of  railroad  traverses 
several  states,  its  earnings  will  be  derived  in  part  from  traffic 
within  each  state  and  in  part  from  traffic  among  the  several  states. 

Should  one  state  by  legislation  or  by  a  commission  fix  charges 
at  figures  deemed  unremunerative  by  the  carriers,  the  attempt 
would  probably  be  made  to  compensate  the  loss  by  increased 
charges  on  traffic  beyond  the  control  of  such  state.  The  traffic  ad- 
ditionally burdened  might  be  either  interstate  in  its  character  or  it 
may  be  wholly  within  the  limits  of  some  other  state  where  charges 
are  not  limited  by  public  authority.  In  either  case  the  bearing 
and  effect  of  the  law  of  a  single  state  upon  one,  or  perhaps  several, 
other  states  is  apparent  enough  to  warrant  further  inquiry  into  the 
matter  than  has  yet  been  made. 

It  is  also  plain  that  the  purpose  of  congress  in  prohibiting  rail- 
way pooling  may  often  be  frustrated  by  purchases,  leases,  and  con- 
solidations of  railroad  companies  under  the  authority  of  state  laws. 
One  of  the  principal  arguments  against  the  anti-pooling  section  of 
the  interstate  commerce  law  has' been  that  it  would  force  competi- 
tive lines  of  railway  into  the  still  more  intimate  relations  arising 
from  consolidations  and  leases. 

The  unification  and  subjection  to  a  common  control  by  these 
methods,  of  lines  formerly  independent  and  sometimes  competi- 
tive has  undoubtedly  proceeded  to  a  very  considerable  extent  since 
the  enactment  of  the  act  to  regulate  commerce,  though  whether 
this  has  been  in  consequence  of  the  anti-pooling  section,  or  whether 
it  would  have  occurred  even  had  that  section  not  been  enacted, 
has  been  questioned.  But  that  its  effect  has  been  to  defeat,  in 
great  measure,  the  object  of  that  section  hardly  admits  of  doubt. 
Whether  that  object  was  wise  or  unwise,  and  whether  consequently 


io8  RAILWAY  LEGISLATION. 

the  action  of  the  carriers  in  partially  defeating  it  by  resorting  to 
consolidations  and  leases  of  competing  lines  has  been  detrimental 
or  beneficial  to  the  public  interests,  it  is  beyond  the  province  of 
this  paper  to  discuss.  The  present  purpose  is  merely  to  show  how 
national  laws  and  regulations,  framed  to  prevent  what  congress 
deems  to  be  a  practice  detrimental  to  the  public,  may  be  deprived 
of  their  intended  effect  by  the  action  of  one  or  more  of  the  states. 

It  is  conceded  by  the  majority  even  of  those  persons  who  favor 
pooling  as  a  means  of  promoting  stability  in  traffic  charges  and 
preventing  unjust  discriminations,  that  consolidation  of  railways 
may  be  carried  to  dangerous  extremes.  The  more  conservative 
advocates  of  pooling  also  admit  that  pooling  agreements  should  be, 
to  some  extent  at  least,  subject  to  the  sanction  and  approval  of 
some  public  tribunal;  but  where  consolidations,  purchases,  or 
leases  are  effected  under  the  authority  of  state  laws  there  can  be 
no  opportunity  for  the  Federal  authorities  to  give  any  valid  sanc- 
tion or  to  express  any  effective^  disapproval  of  the  arrangement. 
Yet  the  effect  of  consolidations  under  state  authority  may  extend 
with  equal  force  to  interstate  traffic  as  to  traffic  within  a  single 
state,  and  may  be  far  more  potent  in  checking  and  limiting  com- 
petition in  transportation  between  the  states  than  any  mere  pool- 
ing agreement  could  possibly  be.  These  brief  suggestions  show 
how  state  action  may  defeat  the  policy  of  Congress  looking  to  pre- 
vent restraints  on  competition  in  interstate  transportation  by  rail- 
roads. Should  the  policy  of  the  national  legislature  in  this  respect 
be  altered  at  some  future  time — that  is,  should  it  be  deemed  ex- 
pedient to  legalize  pooling,  subject  to  proper  supervision  by  the 
Interstate  Commerce  Commission  or  other  Federal  authority — it 
may  possibly  be  found  that  state  constitutions  and  laws  forbidding 
the  unification  in  any  form  of  the  interests  of  competing  lines  will 
be  found  in  conflict  with  such  a  policy.  Nearly  all  railway  com- 
panies owe  their  origin  to  state  legislation,  and  are  subject  only  to 
state  laws  pertaining  to  the  ownership  and  management  of  other 
roads  than  their  own,  either  directly  or  indirectly,  through  the 
purchase  of  controlling  interests  in  stock.  The  bearing  of  this 
fact  upon  national  regulations  of  commerce  is  worthy  of  careful 
attention.  The  unification  of  interests  of  different  railroads,  under 
such  circumstances  as  seriously  to  affect  interstate  commerce,  usu- 
ally requires  the  co-operation  of  two  or  more  states  in  legislating 
to  that  end. 

Jt  is  important,  therefore,  to  know  what  are  the  laws  of  each 
state  in  respect  to  the  rights  of  railroad  companies  of  other  states 
to  consolidate  with  companies  of  its  own  creation,  and  this  whether 
the  consolidation  or  other  unification  of  interests  apply  to  continu- 
ous or  non-competitive  or  to  parallel  or  otherwise  competitive 
lines. 

Consolidations  or  acquisition  into  a  single  hand  of  controlling 
interests  in  several  different  properties,   have  usually  been  found 


RAILWAY  LEGISLATION.  109 

to  occur  first  along  continuous  lines,  and  the  consolidation  of  com- 
peting lines  has  generally  followed  upon  and  in  large  measure  as 
a  consequence  of  the  first  kind  of  consolidation. 

The  unification  of  different  but  continuous  lines  into  a  single 
through  route  between  distant  termini  usually  means  the  addition 
of  a  new  competing  line  between  those  termini,  where,  perhaps,  a 
sufficient  number  of  lines  to  secure  healthful  competition  and  ac- 
commodate all  the  business,  already  exist. 

The  opening  of  unnecessary  routes  in  this  way  has  sometimes 
been  found  seriously  detrimental,  not  only  to  the  interests  of  exist- 
ing lines,  but  to  the  general  commercial  interests  of  the  country. 
It  therefore  suggests  another  aspect  in  which  a  study  of  state  rail- 
way laws  may  be  important  from  a  national  point  of  view. 

One  may  at  first  be  disposed  to  think,  when  a  comprehensive 
study  of  state  railway  laws  is  suggested,  that  its  chief  value  would 
be  to  bring  within  a  single  field  of  view,  for  purposes  of  comparative 
study  and  investigation,  those  provisions  of  legislation  in  different 
jurisdictions  designed  for  the  purpose  of  regulating  the  traffic 
charges  of  railways  and  providing  machinery  for  adjusting  the 
relative  rights  of  carriers  and  communities  dependent  upon  them, 
in  cases  which  the  ordinary  courts  are  incompetent  to  meet;  but 
further  reflection  leads  to  the  conclusion  that  this  is  much  too 
narrow  a  view.  As  has  already  been  shown,  the  attitude  of  a 
single  state  toward  its  railroads,  as  manifested  by  the  presence  or 
absence  of  laws  imposing  regulations  on  transportation  within  its 
limits  often  directly  affects  interstate  transportation.  But  there 
are  statutory  provisions  in  a  number  of  states  besides  those  enacted 
with  the  immediate  purpose  of  regulating  the  commercial  rela- 
tions between  carriers  and  their  patrons  which  have  a  powerful 
indirect  bearing  upon  the  subject.  They  have  a  bearing  not  sim- 
ply upon  the  commerce  under  the  regulative  jurisdiction  of  a  single 
state,  but  they  may  very  greatly  affect  that  commerce  ' '  among 
the  several  states"  which  congress  alone  can  constitutionally  regu- 
late. For  example,  the  restrictions  or  the  absence  of  restrictions 
in  the  several  states  upon  the  power  of  corporations  to  organize 
for  the  construction  of  railways,  especially  in  connection  with  the 
privileges  or  rights  conferred  by  the  laws  of  one  state  upon  the 
railway  corporations  of  another  in  respect  to  leases,  consolidations, 
traffic  agreements,  &c.,  have  a  very  powerful  and  sometimes  prej- 
udicial influence  upon  the  efforts  of  congress  to  maintain  a  proper 
status  of  commercial  rights  throughout  its  wide  domain. 

A  notable  and  familiar  instance  may  be  cited  of  the  construc- 
tion of  new  lines  and  the  opening  of  a  new  route  under  circum- 
stances which  caused  serious  disturbance  of  commercial  relations 
throughout  a  vast  region,  beyond,  as  well  as  within  the  limits  of 
the  states  through  which  the  new  route  extended. 

The  free  railroad  law  of  New  York,  where  no  special  act  of  in- 
corporation is  required,  enabled  the  West  Shore  road  to  be  con- 


no  RAILWAY  LEGISLATION. 

stnicted,  paralleling  the  New  York  Central  from  New  York  to 
Buffalo,  opening  up  practically  no  new  traffic  and  responding  to 
no  well-founded  public  demand. 

Under  the  operation  of  the  laws  of  New  York  and  states  west 
thereof,  the  new  line  entered  mto  business  connections  of  an  inti- 
mate character  with  lines  of  the  latter  states,  forming  a  new 
through  route  to  Chicago.  Over  the  route  thus  formed  a  fight 
for  its  "share  of  the  traffic"  was  at  once  begun,  resulting  in  a 
war  of  rates,  with  all  the  attendant  e\41s  of  unjust  discriminations 
and  fluctuating  charges  throughout  nearly  the  whole  territory 
north  of  the  Potomac  and  Ohio  rivers  and  east  of  the  Mississippi. 
The  final  and  inevitable  result  was  the  absorption  of  the  new  route 
by  the  New  York  Central,  and  the  addition  of  that  much  neces- 
sary capitalization  to  the  aggregate  cost  of  the  great  trunk  lines. 
The  burden  of  producing  a  revenue  on  this  capitalization  rests 
largely  upon  "interstate  commerce." 

The  histor}^  of  this  transaction  has  been  repeated  more  than 
once  in  other  parts  of  the  country. 

Where  a  special  charter  is  required  for  the  construction  of  a  new 
railroad,  or  where  the  permission  of  some  public  board  must  be 
first  obtained  for  the  opening  of  additional  lines,  as  some  states 
provide,  there  is  some  safeguard  against  the  formation  of  unnec- 
essary new  routes  and  dangerous  overconstruction ;  but  the  ques- 
tion is  so  broad  and  the  policy  of  a  single  state  may  be  so  far- 
reaching  in  its  effect  on  other  states  that  it  has  become  one  of 
general  national  concern. 

It  is  eminently  a  question  for  the  careful  consideration  of  Con- 
gress as  well  as  of  the  several  States. 

While  uniformity,  or  at  least  harmony,  in  the  regulative  laws  of 
the  several  states  and  of  Congress^is  desirable,  it  does  not  follow 
that  it  must  be  attained  by  conforming  state  laws  to  existing  Fed- 
eral legislation.  It  may  be  found  wise  to  modify  the  latter  to 
some  extent  to  meet  conditions  resulting  from  the  existence  of 
the  former. 

The  question  of  the  constitutional  right  of  congress  to  take  juris- 
diction of  commerce  confined  within  the  limits  of  the  states  for 
the  purpose,  as  could  be  plausibly  urged,  of  efficiently  exercising  its 
power  to  "regulate  commerce  among  the  several  states"  is  one 
upon  which  a  difference  of  opinion  exists.  There  appears  to  be 
no  direct  adjudication  of  the  question  in  the  courts,  though  there 
are  numerous  dicta  of  eminent  judges  denying,  either  expressly  or 
by  plain  implication,  the  existence  of  any  such  power.  The  inter- 
state commerce  law  clearly  excludes  all  strictly  state  traffic  from 
the  operation  of  its  provisions ;  yet  eminent  jurists  are  known  to 
entertain  the  opinion  that  the  close  interdependence  between  in- 
terstate traffic  and  traffic  confined  within  state  limits  would  justify 
congress  in  exercising  the  power  here  referred  to.  Unless,  how- 
ever, the  necessity  for  congressional  interference  be  very  plain 


RAILWAY  LEGISLATION.  m 

and  urgent,  it  would  surely  be  better  that  this  power,  even  if  it 
exists,  should  remain  dormant.  One  of  the  most  useful  objects 
to  be  accomplished  by  harmonizing  state  and  Federal  legislation 
and  bringing  them  into  co-operation  toward  the  same  end  is  to 
avoid,  as  far  as  possible,  all  occasion  or  pretext  for  extending  the 
regulative  powers  of  Congress  over  transportation  confined  within 
state  limits. 

But  as  preliminary  to  determining  on  a  proper  course  of  action 
in  the  direction  of  harmonizing  all  American  railroad  legislation, 
both  state  and  national,  it  would  seem  wise  to  have  a  compilation, 
carefully  classified,  of  the  railroad  laws  of  all  the  states.  Being 
for  the  benefit  of  all,  this  work  should  be  done  at  the  expense  of 
all — that  is,  through  the  Federal  Government. 

Such  a  compilation  should  include  not  merely  the  laws  enacted 
with  the  immediate  view  of  regulating  transportation,  such  as 
those  creating  commissions  and  conferring  powers  on  them  and 
those  forbidding  unjust  discriminations  and  unreasonable  charges ; 
but  it  should  embrace  all  that  extensive  class  of  statutes  which  in 
any  way,  directly  or  indirectly,  affect  this  question.  A  few  of 
these  have  been  hinted  at  rather  than  discussed  in  this  paper, 
which,  however,  does  no  more  than  touch  upon  a  few  salient  and 
important  points. 

Such  a  compilation  as  is  desirable  would  be  a  considerable  under- 
taking ;  yet  its  cost  to  the  National  Government,  should  the  work 
be  efficiently  done,  would  be  trivial  in  comparison  with  its  value. 


THE    AA\ENDA\ENT    OE    THE    INTERSTATE 
COMMERCE    LAW. 

By  Aldace  F.  Walker. 

Chairman  Joint  Committee  Trunk  Line  and  Central  Traffic  Associations. 

After  six  years  of  experiment  in  the  direction  of  railway  super- 
vision by  Congressional  enactment,  during  which  the  practical 
efficiency  of  the  Act  to  Regulate  Commerce  has  gradually  dwindled 
away,  its  progressive  decline  in  administrative  force  and  in  the 
estimation  of  the  public  being  relieved  only  by  slight  biennial 
tinkerings,  which  have  carefully  avoided  going  to  the  root  of  its 
weaknessee,  a  movement  for  its  amendment  has  at  last  been  set 
on  foot,  having  some  promise  of  valuable  results.  The  act,  in  its 
general  scope  and  in  most  of  its  provisions,  was  a  Senate  bill.  It 
was  introduced  by  a  Select  Committee  of  the  Senate,  after  succes- 
sive investigations  and  a  patient  examination  of  the  subject  of  in- 
terstate commerce  continued  through  several  years.  Following 
its  passage,  the  special  committee  was  made  a  standing  committee 
with  enlarged  membership,  and  having  equal  rank  in  all  respects 
with  the  other  permanent  committees  of  that  body.  Its  special 
field  was  to  observe  the  workings  of  the  Interstate  Commerce 
Law  and  to  improve  its  conditions.  The  House  of  Representa- 
tives has  no  precisely  corresponding  committee.  Its  Committee 
on  Commerce  is  of  much  broader  jurisdiction,  covering  so  many 
topics  which  require  constant  legislative  action  that  it  is  one  of 
the  hardest  worked  committees  of  the  House.  Naturally  the  Sen- 
ate Committee  on  Interstate  Commerce  has  been  looked  to  for  the 
origination  and  prosecution  of  such  measures  as  might  be  required 
to  perfect  the  law  of  1887  and  to  correct  its  mistakes. 

As  yet  it  has  done  practically  nothing.  At  every  session,  repre- 
sentatives of  leading  interests,  railroad  and  public,  as  well  as  the 
Interstate  Commerce  Commission  itself,  have  applied  for  urgently 
needed  relief.  Many  comparatively  trivial  amendments  have  been 
passed,  but  the  most  important  questions  have  been  hitherto 
avoided.  The  double  result  of  this  continued  evasion  of  responsi- 
bility is  that  while  the  railroads  have  suffered  much  injury  and  in 
many  cases  have  been  brought  to  a  point  where  future  operation 

Reprinted  by  permission  from  The  Independent  of  June  i,  1893. 


AMENDMENT  OF  INTERSTATE  COMMERCE  LAW.  113 

has  become  financially  difficult,  on  the  other  hand  shippers  have 
learned  to  ridicule  the  provisions  of  the  law,  and  quite  universally 
to  ignore  its  mandates  in  the  business  competition. 

At  last  a  ray  of  light  appears.  The  Senate  Committee  has  been 
reorganized  recently  and  has  obtained  leave  to  prosecute  during 
the  present  recess  an  inquiry  concerning  certain  alleged  weak- 
nesses of  the  law  with  a  view  to  their  amendment.  True,  the 
field  of  investigation  marked  out  by  the  resolution  of  April  15, 
1893,  is  limited;  but  in  introducing  proposals  of  amendment  the 
committee  has  the  broadest  powers  and  is  not  restricted  to  the 
subjects  enumerated  for  inquiry.  Those  subjects  are  four:  pool- 
ing, the  short  haul  clause,  Canadian  competition,  and  labor;  all 
important  questions,  but  by  no  means  comprising  all  the  topics  on 
which  legislation  is  necessary. 

The  repeal  of  the  fifth  section  of  the  present  law,  being  the 
anti-pooling  section,  and  the  substitution  therefor  of  some  form  of 
legalized  and  regulated  arrangement  for  the  fair  distribution  of 
common  traffic  among  competing  lines  may  be  fairly  expected  as 
an  immediate  result  of  this  investigation.  The  impossibility  of 
much  longer  carrying  on  railway  operations  with  success  in  the 
face  of  the  present  prohibition  of  pooling  has  at  last  become  mani- 
fest to  the  general  public.  Little  opposition  to  this  change  now 
exists,  none  among  those  who  have  studied  the  subject  intelli- 
gently. A  large  majority  of  the  House  Committee  on  Commerce 
in  the  last  Congress  united  in  supporting  such  a  measure  with  at 
least  the  tacit  approval  of  the  Interstate  Commerce  Commission; 
the  Senate  Committee  showed  a  majority  of  only  one  against  it. 
Heretofore  the  railroads  have  apparently  been  regarded  as  public 
enemies,  to  be  "controlled"  and  "restricted"  and  circumvented 
in  every  possible  way.  A  fairer  spirit  is  now  apparent  on  all 
sides,  under  which  it  is  recognized  that  even  railway  corporations 
have  a  right  to  exist,  and  to  exist  successfully,  as  other  business 
interests  are  allowed  to  do ;  and  that  the  pressure  of  the  present 
extreme  traffic  conditions  is  bearing  too  hard  upon  many  com- 
panies whose  financial  ruin  would  produce  widespread  disaster. 
It  is  perceived  that  with  the  present  unprecedentedly  low  scale  of 
railway  earnings  the  line  of  safety  for  the  public  in  respect  of  effi- 
ciency, and  in  some  cases  even  of  security  in  operation,  is  danger- 
ously near.  It  is  also  becoming  generally  understood  that  the 
making  or  "establishing"  of  railway  rates,  and  the  "maintaining"  of 
those  rates  when  so  established,  are  two  very  different  things ;  that 
both  are  absolute  necessities  to  any  scheme  of  governmental  su- 
pervision ;  and  that  the  pooling  of  freights  or  of  earnings  is  the 
only  practical  way  known  in  the  history  of  the  world,  short  of  a 
common  ownership,  by  which  such  an  absolute  maintenance  of 
rates  as  is  justly  required  by  law  for  the  prevention  of  unjust  dis- 
crimination can  be  secured.  In  other  words,  it  is  seen  at  last  that 
the  fair  division  of  competitive  traffic  would  be  an  aid  and  support 


114 


AMENDMENT  OF  INTERSTATE  COMMERCE  LAW. 


to  the  reg-ulative  statute.     In  the  judgment  of  many  it  should  not 
only  be  permitted  but  compelled  by  law. 

Aside  from  certain  newspapers  and  politicians  that  are  still 
found  catering  to  public  ignorance  in  respect  to  this  question,  the 
only  objection  now  heard  to  the  legalizing  of  pooling  comes  from 
the  timid,  who  are  still  occasionally  heard  to  say  that  it  might 
afford  a  basis  for  the  oppression  of  the  publi'c  by  means  of  extor- 
tionate rates.  There  are  many  replies  to  this  fear.  It  is  only  a 
fear,  not  a  fact,  as  the  history  of  past  agreements  clearly  shows. 
The  object  of  the  railway  pool  is  the  maintaining  of  tariff  rates, 
not  the  lifting  or  even  making  of  them.  Competition  of  markets, 
of  producing  points  and  of  other  carriers  will  always  keep  rates 
low  and  force  them  lower.  The  purpose  of  the  pool  is  not  to  ex- 
tinguish competition,  but  to  regulate  it,  and  that  but  slightly. 
The  reasonableness  of  the  rate  is  the  point  in  which  the  public  are 
interested,  together  with  a  just  equality  of  charges  for  equivalent 
services,  which  reasonableness  is  subject  to  control,  and  which 
equality  is  the  very  object  aimed  at  by  the  railway  pool. 

If  still  there  is  fear,  then  let  the  making  and  operation  of  traffic 
contracts  be  surrounded  by  such  safeguards  as  reasonable  men 
may  devise ;  the  railroads  will  not  object,  for  they  know  them  to 
to  be  unnecessary  and  harmless;  while  the  hesitating  legislator 
may  thus  overcome  his  fears,  or  satisfy  his  convictions. 

The  next  topic  on  the  Senatorial  scheme  is  the  famous  ' '  long 
and  short  haul  clause,"  a  bit  of  legislation  which  at  first  filled  the 
public  eye  so  completely  that  many  regarded  it  as  all  there  was  to 
the  law,  and  believed  that  its  rigid  application  would  accomplish 
a  transportation  millenium.  Of  late  it  has  attracted  little  atten- 
tion ;  its  inclusion  in  the  resolution  for  investigation  was  on  mo- 
tion of  Senator  Hoar,  perhaps  as  a  reminiscence  of  the  time  when 
he  so  vigorously  opposed  its  original  engraftment  upon  the  Senate 
Bill.  This  clause  has  been  very  differently  regarded  by  railroad 
officials;  those  connected  by  direct  routes  and  short  lines  natu- 
rally being  believers  in  its  justice,  while  those  employed  upon  cir- 
cuitous routes  and  meeting  active  terminal  competition  have  as 
naturally  regarded  its  rule  as  unjust.  It  seems  to  have  been  en- 
acted upon  the  idea  that  it  was  a  protection  to  intermediate  points 
upon  indirect  routes,  and  to  small  communities  which  did  not  en- 
joy competitive  facilities;  but  its  value,  if  any,  in  that  direction 
has  been  more  than  counterbalanced  by  the  unfortunate  anti-pool- 
ing section,  which  turned  the  roads  over  to  the  tender  mercies  of 
heavy  shippers  at  terminal  points,  without  the  possibility  of  pro- 
tection against  alliances  "in  the  form  of  trust  or  otherwise."  In 
this  way  traffic  of  great  value  to  the  carriers  has  been  hawked 
about  to  the  lowest  bidder,  in  defiance  of  law  and  resulting  in 
great  injustice  to  less  potential  shippers  at  less  influential  points 
in  the  interior. 

It  seems  probable  that  if  the  fourth,  or  short-haul  section  is 


AMENDMENT  OF  INTERSTATE  COMMERCE  LAW.  115 

amended  at  all  it  will  be  in  the  direction  of  making  more  clear  and 
definite  the  construction  of  its  exceptions.  The  words  "under 
similar  circumstances  and  conditions  "  have  been  construed  with 
elasticity  or  with  rigidity  according  to  the  different  ideas  of  those 
who  have  had  to  face  this  question.  Even  the  Interstate  Com- 
merce Commission  during  the  last  year  has  announced  a  revised 
construction  of  the  section  which  very  materially  differs  from  its 
own  previous  rulings.  The  courts  have  not  yet  had  an  oppor- 
tunity to  pass  upon  it  in  any  decisive  way.  The  great  point  of 
difficulty  has  been  the  determination  of  the  extent  to  which  the 
competition  of  other  carriers  subject  to  the  provisions  of  the  law 
justifies  a  departure  from  the  short-haul  rule  on  circuitous  routes 
of  traffic ;  and  if  testimony  is  taken  by  the  Senate  Committee  upon 
this  point  many  facts  will  be  developed  in  different  parts  of  the 
country  that,  to  say  the  least,  will  be  interesting. 

Upon  the  question  of  traffic  between  points  in  the  United  States 
over  roads  passing  through  the  Dominion  of  Canada  much  has 
been  heard  of  late.  It  is  claimed  by  the  American  lines  that  the 
law  discriminates  in  favor  of  Canadian  lines  and  requires  amend- 
ment in  order  to  put  the  former  upon  ^n  even  keel  with  the  latter. 
The  Canadian  roads  strenuously  deny  this,  and  assert  that  there  is 
now  a  complete  equivalence.  More  than  this  the  American  roads 
should  not  ask ;  less  than  this  the  Canadian  roads  should  not  de- 
sire. The  question  of  the  justice  of  the  working  of  the  statute  in 
its  present  form  is  one  of  fact,  to  be  determined  upon  the  evidence 
submitted  to  the  committee,  and  upon  which  it  is  to  be  hoped  that 
a  clear  and  definite  report  will  be  made,  and  that  this  subject  may 
be  soon  forever  settled. 

The  labor  clause  seems  to  have  been  introduced  into  the  resolu- 
tion, judging  from  the  debate  which  preceded  its  formulation, 
upon  the  idea  that  the  interpretation  given  to  the  third  and  tenth 
sections  of  the  act  by  the  courts  of  the  United  States  in  the  recent 
cases  decided  at  Toledo,  infringed  upon  the  rights  of  workingmen ; 
or,  as  was  charged  by  Senator  Voorhees,  enslaved  them.  It  is 
probable  that  more  precise  knowledge  as  to  the  exact  scope  of 
these  decisions  has  since  modified  the  fears  at  first  entertained. 
It  turns  out  that  they  only  went  to  the  extent  of  requiring  em- 
ployes to  recognize  the  obligations  of  the  law  so  long  as  they  re- 
mained in  the  company's  service;  in  other  words,  holding  that 
engineers  equally  with  directors  and  stockholders  are  amenable  to 
the  requirement  of  the  law  that  interstate  commerce  exchanged 
with  connecting  roads  must  be  handled  without  discrimination ; 
but  the  right  of  employes  to  quit  the  company's  service  at  the  end 
of  any  day's  run  was  recognized  in  the  absence  of  a  contract  or  a 
law  requiring  a  longer  notice.  The  protection  of  the  public 
against  interruption  of  transportation  service  by  strikes  of  em- 
ployes was  not  the  thought  which  led  to  the  inclusion  of  this  sub- 
ject in  the  resolution ;  but  it  is  by  no  means  an  impossible  outcome 
of  the  investigation. 


Ii6        AMENDMENT  OF  INTERSTATE  COMMERCE  LAW. 

A  few  other  points  in  which  the  law  requires  amendment  may 
be  hastily  reviewed.  One  is  the  making  of  railway  corporations 
subject  to  its  penalties.  It  seems  strange  that  such  is  not  now  the 
case ;  and  it  appears  to  be  true  that  the  purpose  to  have  it  so  failed 
through  a  not  unnatural  error  on  the  part  of  the  draftsman  of  the 
bill.  However  this  may  be,  a  United  States  Court  has  held  that 
under  its  present  phraseology  an  indictment  will  not  lie  aga.inst  a 
railway  company,  but  only  against  its  officers,  agents  and  em- 
ployes. In  the  same  connection  the  fact  may  be  noticed  that  the 
penalties  now  standing  against  the  latter  include  a  possible  im- 
prisonment in  the  penitentiary,  for  offenses  which  are  only  statu- 
tory misdemeanors  and  are  not  infamous  crimes,  the  excessive 
severity  of  which  punishment  has  been  a  most  serious  obstacle  in 
the  way  of  the  enforcement  of  the  law.  If  one  corporation  could 
complain  against  its  rival  corporation  for  infractions  of  the  statute, 
and  not  as  now  only  against  its  servants  with  the  chance  of  their 
imprisonment  for  acts  in  which  they  were  not  principals  but  agents 
merely,  the  operative  efficiency  of  the  statute  would  be  increased 
a  thousandfold.  As  the  law  now  reads  no  such  complaints  are 
ever  made.  Amendments  *o  cover  both  these  points  passed  the 
House  in  the  last  Congress,  with  the  active  support  of  many  rail- 
way companies,  and  might  have  passed  the  Senate  also  if  the  bill 
which  included  them  had  not  been  side-tracked  in  order  to  give 
the  right  of  way  to  what  was  called  the  Coupler  Bill. 

Another  topic  which  deserves  the  attention  of  the  committee  is 
found  in  connection  with  the  fact  that  the  title  of  the  bill  passed 
in  1887  was  a  very  serious  misnomer.  It  was  called  an  Act  to 
Regulate  Commerce.  In  fact  it  was  only  an  act  to  regulate  cer- 
tain common  carriers  by  rail.  It  does  not  undertake  to  regulate 
commerce  at  all,  but  only  a  single  one  of  the  agencies  of  com- 
merce. Even  considered  as  an  act  to  regulate  transportation, 
which  is  by  no  means  the  equivalent  of  commerce,  it  is  only  par- 
tial in  its  scope.  It  fails  to  regulate  carriers  by  water,  the  volume 
of  whose  transportation  approximates  that  of  the  railways.  It 
does  not  attempt  to  deal  with  other  transportation  agencies  by 
land,  such  as  draymen,  stagecoaches,  elevators,  etc.,  or  even 
with  subordinate  carriers  making  use  of  railway  facilities,  such  as 
sleeping  car  companies,  express  companies,  livestock  transporta- 
tion companies,  and  private  car  companies  of  all  kinds.  It  even 
excludes  in  set  terms  all  railway  traffic  which  is  conducted  within 
the  boundaries  of  individual  states.  It  is  altogether  partial  and 
incomplete;  and  its  partiality  and  incompleteness  in  these  re- 
spects are  unjust  and  unfair,  because  conditions  are  imposed  upon 
one  set  of  carriers  to  which  others  are  not  subjected. 

Undoubtedly  it  was  considered  wise,  six  years  ago,  to  leave  ves- 
sels and  steamboats  carrying  traffic  upon  the  numberless  lakes, 
rivers  and  canals  of  the  country  as  well  as  upon  its  seaboard,  free 
from  restrictions,  while  the  railroads  should  be  bound,  to  the  end 


AMENDMENT  OF  INTERSTATE  COMMERCE  LAW.  ny 

that  the  unbridled  competition  of  the  former  might  have  full  scope  to 
pull  down  the  charges  of  the  latter.  This  purpose  was  distinctly  set 
forth  as  an  excuse  for  not  giving  a  broader  j  urisdiction  to  the  law. 
But  has  not  the  time  now  arrived  when  such  an  important  ques- 
tion can  be  approached  with  less  prejudice  and  with  more  of  jus- 
tice? After  the  experience  of  the  last  six  years,  with  its  continued 
object  lesson  of  the  "vanishing  profit,"  so  far  as  railways  are  con- 
cerned, with  a  constant  struggle  on  the  part  of  railway  managers 
everywhere  to  reduce  expenses  by  improved  facilities,  and  to  at- 
tract business  by  improved  service,  while  the  future  dividend  is 
either  a  known  impossibility  or  an  unknown  speculation,  is  it  not 
clear  that  the  Act  should  now  be  amended  and  enlarged  to  con- 
form to  its  title,  or  that  the  title  should  be  re-defined  into  corres- 
pondence with  the  provisions  of  the  Act,  and  at  the  same  time  the 
unfairness  of  the  present  conditions  be  so  far  as  possible  elimi- 
nated? 

Another  question  which  should  be  settled  and  settled  soon,  is 
that  of  the  rate-making  power.  The  Interstate  Commerce  Com- 
mission at  first  disclaimed  power  to  make  rates  generally  under 
the  law,  but  has  since  inferred  from  the  present  statute  that  Con- 
gress intended  to  confer  power  upon  that  body  to  establish  maxi- 
mum reasonable  rates  upon  all  interstate  traffic.  It  is  admitted 
that  the  law  in  terms  says  no  such  thing ;  but  its  first  section  de- 
clares that  all  charges  must  be  reasonable  and  just ;  many  com- 
plaints have  been  made  to  the  Commission  that  rates  were  rela- 
tively too  high,  and  it  has  frequently  advised  roads  of  its  opinion 
to  that  effect ;  the  Commission  argues  that  unless  it  is  authorized 
to  say  what  rate  shall  be  considered  reasonable  and  just,  there  is 
no  way  by  which  the  first  section  can  be  made  effective ;  hence 
Congress  must  have  intended  to  confer  that  power  upon  the  Com- 
mission. 

In  some  cases  the  arguments  of  the  Commission  touching  the 
reasonableness  of  the  rates  in  question  have  commended  them- 
selves to  the  carriers,  who  have  conformed  to  the  recommenda- 
tions made.  In  other  cases  their  reasoning  has  appeared  to  the 
roads  to  be  strained  and  their  findings  arbitrary,  and  in  some 
cases  the  result  has  been  found  impossible  of  application  by  rea- 
son of  the  position  taken  by  other  lines  not  parties  to  the  contro- 
versy heard.  Several  suits  have  been  brought  to  enforce  the 
rates  named  by  the  Commission  under  this  claim  of  authority, 
many  of  which  are  now  pending  and  some  of  which  involve  the 
demand  that  a  rebate  be  paid  during  a  period  antecedent  to  the 
naming  of  the  rate  by  refunding  the  difference  between  the  tariff 
published  under  the  law  and  that  afterward  awarded  as  the  view  of 
the  Commissioners.  None  of  these  cases  have  been  decided  by  the 
courts,  and  the  question  whether  Congress  conferred  any  such  power 
upon  the  Commission  in  the  law  together  with  the  further  ques- 
tion of  the  authority  of  Congress  in  the  premises,  are  constant 


ii8        AMENDMENT  OF  INTERSTATE  COMMERCE  LAW. 

sources  of  uncertainty  and  irritation.  These  difficulties  should  be 
laid  at  rest.  There  is  very  great  doubt  whether  the  constitutional 
grant  of  power  "  to  regulate  commerce  "  conferred  upon  Congress 
a  right  to  fix  the  rates  which  shall  be  charged  for  transportation, 
or  whether  by  that  clause  anything  more  was  in  fact  originally  in- 
tended than  that  interstate  commerce  should  be  forever  free  from 
State  restrictions;  whether,  if  Congress  has  the  power  to  make 
tariffs  on  railroads — not  of  Congressional  charter,  but  existing 
under  State  laws — it  can  delegate  that  power  to  a  commission ; 
whether,  if  it  can  empower  a  non-judicial  and  semi-political  body 
to  nominate  maximum  rates  all  over  the  land,  it  is  a  part  of  wisdom 
to  do  so,  rather  than  to  leave  the  establishment  of  tariffs  to  the 
natural  and  persistent  play  of  competitive  forces,  universal  in 
their  nature  and  omnipotent  in  their  strength. 

Experience  in  this  and  in  many  other  countries  has  shown  the 
impossibility  of  establishing  transportation  charges  by  rule  of 
thumb,  or  by  any  kind  of  procrustean  rule.  Natural  conditions 
have  uniformly  proved  too  strong  for  such  laws  to  overcome ;  and 
when  those  forces  have  produced  a  scale  of  rates  as  phenomenally 
low  as  that  which  the  American  public  quite  generally  enjoys,  the 
policy  of  attempting  to  introduce  a  new  authority  may  be,  and  is, 
very  seriously  challenged. 

But  if  Congress  is  of  opinion  that  it  is  to  go  into  the  business  of 
making  railway  rates,  it  should  face  the  question  deliberately,  and 
confer  the  power  in  set  terms,  leaving  nothing  to  implication, 
either  as  to  the  extent  of  authority  intended,  or  as  to  the  methods 
of  its  use.  The  rules  for  deciding  what  shall  be  a  ' '  reasonable 
rate"  should  be  fixed  in  the  law;  it  should  afford  to  the  carriers 
who  may  feel  their  just  revenues  imperiled,  the  protection  to  which 
they  are  constitutionally  entitled,  by  establishing  a  right  of  appeal 
to  the  courts,  which  does  not  now  exist.  It  should  include  the 
rates  of  all  common  carriers,  especially  of  carriers  by  water.  It 
should  also  confer  upon  whatever  body  may  be  deemed  the  trust- 
worthy recipient  of  the  rate-making  power  an  authority  to  raise 
rates  as  well  as  to  lower  them ;  there  is  as  much  public  danger  in 
rates  too  low  as  in  rates  too  high ;  and  the  cases  are  frequent  in 
which  the  desired  relative  adjustment  can  be  better  reached  by 
advances  than  by  reductions  in  tariffs. 

One  point  more  demands  attention,  and  it  is  a  point  of  supreme 
importance.  I  refer  to  the  standing  of  the  Interstate  Commerce 
Commission  and  its  relation  to  the  law.  In  this  respect  the  act 
was  inexcusably  crude.  The  idea  seems  to  have  been  to  lay 
down  certain  general  principles,  under  which  common  law  rules 
against  unjust  discrimination,  undue  preferences  and  unreasonable 
charges  were  accepted  as  applicable  to  interstate  commerce,  and 
then  to  appoint  a  commission  to  work  the  problem  out.  That 
was  a  very  plausible  evasion  of  responsibility  on  the  part  of  Con- 
gress, but  was  also  exceedingly  unfair  to  the  Commission.     So 


AMENDMENT  OF  INTERSTATE  COMMERCE  LAW.  119 

loosely  was  the  work  of  drawing  up  the  statute  in  this  respect  per- 
formed that  it  was  soon  perceived  that  while  the  Commission  was 
required  to  administer  and  enforce  the  law  it  had  no  administra- 
tive powers  whatever;  and  while  it  was  required  to  decide  ques- 
tions under  the  law,  it  had  no  judicial  qualities ;  and  while  it  was 
both  semi-administrative  and  quasi-judicial,  it  was  neither  a  prose- 
cuting officer  or  a  court.  In  fact  the  law  created  a  composite 
body,  part  detective,  part  state  attorney,  part  statistician,  part 
rate  bureau  and  part  court,  with  no  actual  power  in  any  single 
direction.  The  inconsistency  of  appointing  the  same  men  to  act 
at  the  same  time  as  prosecutors  and  as  judges  does  not  seem  to  have 
occurred  to  any  one ;  yet  it  is  an  actual  fact  that  the  Interstate 
Commerce  Commissioners  are  in  one  section  required  to  hold 
the  scales  of  justice  impartially  in  the  decision  of  traffic  ques- 
tions between  shippers  and  carriers,  and  in  another  section  are 
required  to  keep  their  eyes  open  for  every  breach  of  the  law  on 
the  part  of  either  carriers  or  shippers,  and  see  to  it  that  due  pun- 
ishment follows. 

Of  course  this  scherae  is  not  worked,  and  it  never  can  work. 
The  fact  is  that  the  present  status  of  the  Commission  is  an  impos- 
sible one,  a  fact  which  sufficiently  accounts  for  its  inability  to 
effect  results.  It  either  should  be  a  court,  or  it  should  be  an  ad- 
ministrative body ;  one  or  the  other ;  it  is  ridiculous  to  try  and 
make  it  both  judicial  and  administrative,  being  at  the  same  time 
neither.  It  would  be  much  better  if  its  powers  were  simply  ad- 
visory, as  in  the  case  with  some  of  our  most  useful  state  railway 
commissions. 

If  that  idea  is  not  acceptable,  then  the  Commission  should  be 
either  a  branch  of  the  Department  of  Justice,  with  power  to  em- 
ploy special  agents  in  ferreting  out  crimes  and  supervising  prose- 
cutions in  detected  cases  of  violation,  leaving  the  settlement  of 
civil  controversies  to  the  courts ;  or  it  should  be  a  part  of  the 
Judiciary,  with  no  further  demands  upon  its  attention  than  to  ad- 
judge controversies  submitted  by  parties,  leaving  the  enforcement 
of  the  penalties  of  the  law  to  the  Bureau  of  Justice,  which  en- 
forces other  penal  statutes.  The  statistical  and  recording  duties 
now  imposed,  and  the  tariff  bureau,  might  well  be  attached  to  the 
Department  of  the  Interior ;  they  have  no  relation  to  the  deter- 
mination of  causes,  or  to  the  enforcement  of  the  law,  except  as  they 
may  be  drawn  upon  for  evidence. 

In  England  the  Railway  Commission  is  a  judicial  body  of  high 
standing.  Its  duties  are  clearly  defined  and  its  powers  are  care- 
fully conferred.  If  such  a  body  could  be  organized  in  the  United 
States  its  field  of  usefulness  would  be  a  grand  one ;  its  decisions 
would  have  legal  sanction,  and  the  results  of  its  investigations 
would  command  universal  respect. 

The  attention  of  legislators  has  frequently  been  called  to  this 
subject  in  a  quiet  way;  and  it  was  somewhat  discussed  before  the 


I20  AMENDMENT  OF  INTERSTATE  COMMERCE  LAW. 

Senate  Committee  two  years  ago,  in  connection  with  an  amend- 
ment proposed  by  the  Commission  designed  to  assimilate  its  status 
more  closely  to  that  of  a  Master  in  Chancery.  The  time  has  come 
when  the  situation  should  be  frankly  and  publicly  stated,  to  the 
end  that  if  the  present  condition  of  affairs  is  to  continue,  it  may 
be  prolonged  intelligently,  and  for  some  good  reason. 

During  the  last  Congress  a  bill  (S.  3,805),  was  introduced  so 
late  in  the  session  that  it  received  no  consideration  whatever ;  but 
if  the  name  of  its  author  could  be  given  it  would  now  command 
immediate  attention.  It  was  entitled  ''A  Bill  creating  Circuit 
Courts  of  Interstate  Commerce."  It  proposed  to  create  such  a 
court  in  each  of  the  nine  judicial  circuits  in  the  United  States, 
consisting  of  one  justice  for  each  circuit,  to  have  original  and  ex- 
clusive jurisdiction  of  all  cases  arising  under  the  Interstate  Com- 
merce Act,  with  full  powers ;  also  a  circuit  court  of  interstate  com- 
merce appeals,  consisting  of  the  same  nine  justices,  five  to  be  a 
quorum ;  the  Supreme  Court  to  review  finally  questions  of  juris- 
diction and  of  constitutional  right,  and  the  present  Interstate  Com- 
merce Commission  to  be  abolished. 

Whether  or  not  this  plan  or  something  like  it  shall  be  adopted ; 
whether  new  administrative  power  shall  be  conferred  upon  the 
Commission,  or  whether  some  other  method  shall  be  devised  for 
the  enforcement  of  the  law  and  the  prompt  determination  of  con- 
troversies arising  under  its  provisions,  presents,  perhaps,  the  most 
important  question  that  will  confront  the  committee  of  the  Sen- 
ate. Certainly  the  plan  proposed  in  the  draft  above  referred  to 
has  much  at  first  blush  to  commend  it ;  and  if  the  present  intelli- 
gent and  sincere  members  of  the  Commission  could  transfer  their 
trained  experience  to  a  veritable  judicial  position,  like  that  sug- 
gested, their  services  would  be  of  far  greater  value  to  the  country 
than  can  be  possible  under  the  present  lavv,  while  parties,  whether 
shippers  or  carriers,  having  grievances  arising  from  breaches  of 
its  provisions,  would  be  assured  of  a  tribunal  to  which  such  ques- 
tions could  be  submitted  for  immediate  and  effectual  adjudication. 

Chicago,  111. 


THE  LEGAL  ASPECT  OE  RAILROAD  STRIKES- 
THE  ANN  ARBOR  DECISION. 

By  General  Wager  Swayne. 

An  act  of  Congress,  which  became  a  law  March  2,  1889,  pro- 
vides that  if  any  common  carrier  (which,  of  course,  includes  the 
railroad  companies)  shall  fail  or  refuse  to  move  and  transport  the 
traffic  or  to  furnish  cars  or  other  facilities  for  transportation  for  all 
parties,  upon  equal  terms,  so  far  as  interstate  commerce  is  con- 
cerned, the  Courts  of  the  United  States,  upon  a  proper  showing, 
shall  make  a  peremptory  order  requiring  the  common  carrier  com- 
plained of  to  abolish  the  inequality  and  furnish  to  the  party  com- 
plaining equal  facilities  in  all  respects  so  far  as  the  circumstances 
themselves  are  equal. 

A  rule  of  the  Brotherhood  of  Locomotive  Engineers  provides 
that  it  shall  be  recognized  as  a  violation  of  obligations  for  a  mem- 
ber of  the  Brotherhood  who  may  be  employed  on  a  railroad  run- 
ning in  connection  with,  or  adjacent  to  said  road,  to  handle  the 
property  belonging  to  said  railroad  system  in  any  way  that  may 
benefit  said  company  with  which  the  Brotherhood  is  at  issue, 
until  the  grievance,  or  issue,  of  whatever  nature  or  kind  has  been 
amicably  settled. 

These  two  rules  are  in  plain  conflict.  One  of  them  provides 
that  under  no  circumstances  shall  a  railroad  company  refuse  to 
haul  all  freight  offered  by  other  companies,  upon  equal  terms. 
The  other  provides  that  no  member  of  the  Brotherhood  shall  assist 
in  enabling  the  company  by  which  he  is  employed  to  perform  this 
duty,  thus  required  by  law,  in  any  case  where  the  company  offer- 
ing the  freight  is  one  with  which  the  Brotherhood  is  at  issue. 

Such  an  issue  arose  between  the  Brotherhood  and  the  Toledo, 
Ann  Arbor  and  North  Michigan  Railway.  Thereupon,  four  en- 
gineers of  the  Lake  Shore  and  Michigan  Southern  Railway  Co., 
ordered  to  move  trains  which  contained  cars  destined  for  the  Ann 
Arbor  Company,  simply  quit  the  employ  of  the  Lake  Shore. 

The  United  States  Court  pronounced  this  action  not  unlawful 
A  fifth  engineer  did  not  quit  the  service  of  the  company,  but  sim- 
ply refused  to  move  his  engine  until  the  Ann  Arbor  Company's 

Reprinted  by  permission  from  The  Independent  of  June  i,  1893. 


I 
122  RAILROAD  STRIKES— THE  ANN  ARBOR  DECISION. 

cars  should  be  withdrawn  from  the  train  to  which  it  was  attached. 
As  the  Lake  Shore  Company  was  already  under  an  order  from  the 
court,  directing  it  to  make  no  difference  between  the  Ann  Arbor 
Company's  cars  and  those  of  other  companies,  and  this  order  was 
known  to  the  ensrineer,  the  court  held  him  guilty  of  contempt, 
and  imposed  a  fine  iipon  him,  declaring  that,  while  the  men  re- 
mained in  the  service  of  the  company,  they  should  assist  the  com- 
pany to  perform  its  whole  duty  as  required  by  law,  but  holding, 
also,  that  they  were  free  at  any  time  to  quit  the  company's  service. 

This  was  the  first  issue  decided,  and  was  decided  by  Judge 
Ricks,  of  the  District  Court. 

A  larger  issue  arose  from  the  action  of  the  Grand  Master  of  the 
Brotherhood  of  Locomotive  Engineers  in  issuing  an  order  to  all 
the  engineers  upon  the  Lake  Shore  road  to  refuse  to  move  trains 
which  might  contain  freight  destined  for,  or  received  from,  the 
Ann  Arbor  lines. 

An  Act  of  Congress,  which  has  been  in  force  for  many  years, 
provides  that,  if  two  or  more  persons  shall  conspire  to  induce  a 
breach  of  any  law  of  the  United  States,  they  shall  be  deemed  as 
conspirators,  and  may  be  punished. 

The  Circuit  Court  of  the  United  States,  whose  jurisdiction  is 
superior  to  the  District  Court,  and  which  was,  in  this  instance, 
presided  over  by  Judge  Taft,  held  that  the  action  of  the  Brother- 
hood in  directing  its  chief  engineer  to  issue  such  an  order,  and  his 
action  in  issuing  it,  was  a  conspiracy  under  the  statute  above 
quoted,  and  peremptorily  required  the  Grand  Master  to  revoke 
the  order,  on  peril  of  contempt. 

In  each  case  the  action  of  the  court  seems  to  have  been  plainly 
such  as  was  required  by  the  law.  Therefore,  the  question  of  the 
propriety  of  the  court's  action  is  really  a  question  of  the  propriety 
of  the  statute. 

The  legislation  in  the  United  States  differs  apparently,  in  this 
regard,  from  that  of  England,  the  final  result  of  which  seems  to 
be  that  it  shall  not  be  unlawful  for  two  or  more  persons  to  act 
together  in  doing  that  which  it  would  not  be  unlawful  in  them  to 
do,  acting  separately. 

It  will  be  seen,  however,  that  the  right  of  the  individual  to  quit 
the  company's  employ  at  pleasure  is  not  drawn  in  question  by 
either  of  these  courts.  On  the  contrary,  it  is  expressly  held  in- 
violate by  the  District  Court.  It  is  obvious,  however,  that  situa- 
tions are  always  present  in  daily  life  where  the  right  to  forsake  an 
employment  at  pleasure  cannot  be  freely  exercised.  A  nurse,  for 
example,  cannot  abandon  her  employment  while  in  charge  of  an 
infant  on  the  highway,  and  the  situation  of  an  engineer  in  charge 
of  the  motive-power  of  the  train  upon  a  railroad  highway  may 
sometimes  be  much  the  same. 

The  real  question,  however,  is  that  involved  in  the  conflict  be- 
tween the  rule  of  the  Brotherhood  and  the  conspiracy  laws  of  the 


RAILROAD  STRIKES— THE   ANN  ARBOR  DECISION.  123 

United  States.  It  brings  squarely  up  a  question  between  the 
claim  of  organized  labor  to  assert  its  collective  power,  and  the 
public  need  that  the  railroad  shall  be  operated  freely  at  all  times 
in  the  service  of  the  public. 

If  this  were  simply,  or  even  mainly,  a  question  between  the 
Brotherhood  and  the  railroad  companies,  it  might  safely  be  left  to 
its  logical  outcome  of  united  action  by  the  companies  against  the 
united  action  of  labor,  and  to  the  conservatism  natural  to  interests 
so  large  as  would  then  be  involved.  The  difficulty  is  that  this  leaves 
the  unoffending  public  to  be  chief  sufferer,  as  it  has  been,  in  all 
the  struggles  and  contentions  which  must  necessarily  precede  this 
equilibrium.  The  public,  as  has  been  seen,  has  already  taken 
action,  and,  through  the  courts,  it  requires  that  the  engineer  do 
his  whole  duty,  or  quit,  and  inhibits  collective  action  taken  with  a 
view  to  disabling  the  railroad  as  a  public  servant.  Probably  the 
best  relief  lies  in  the  direction  of  time  contracts,  prohibiting  alike 
the  men  from  forsaking  their  engines  and  the  company  from  dis- 
charging them,  except  on  a  few  days'  notice;  but  any  such  con- 
tract involves  the  question  of  "involuntary  servitude  "  which,  by 
a  clause  of  the  United  States  Constitution  is  prohibited  "  through- 
out the  United  States,  and  in  all  places  subject  to  their  juris- 
diction." 

In  an  article  in  the  current  issue  of  The  North  A  merican  Review^ 
Mr.  Sargent,  Grand  Master  of  the  Brotherhood  of  Locomotive 
Firemen,  insists  that  any  such  obligation,  if  enforced  by  law, 
would  be  not  only  contrary  to  this  constitutional  provision,  but 
also  in  effect  would  weld  the  man  to  the  machine  and  make  him  a 
helpless  slave.  The  obvious  reply  is  that  human  law  deals  only 
with  extremes  of  human  conduct  and  the  precept  against  involun- 
tary servitude,  and  every  such  law,  has  to  be  enforced  with  due 
regard  to  other  laws  and  necessary  situations.  The  case  of  the 
nurse,  above  cited,  the  soldier  under  arms,  are  familiar  illustra- 
tions; others  are  supplied  by  every  situation  in  life. 

I  am  told  that  Mr.  Arthur,  of  the  Brotherhood  of  Locomotive 
Engineers,  has  said  that  if  you  take  away  the  privilege  of  the  boy- 
cott from  organized  labor  its  fight  against  capital  will  be  futile. 
If  by  this  statement  he  means  that  engineers  shall  be  free  to  com- 
pel railroad  companies  to  bovcott  the  railroads  of  other  companies, 
it  may  be  said  in  reply  that  the  peremptory  question  here  is  not 
the  success  or  failure  of  organized  labor,  but  the  indispensable 
protection  of  the  public. 

It  has  been  said  in  some  quarters  that  this  disagreement  be- 
tween the  railroad  and  its  engineers  will  lead  to  and  hasten  the 
Government  ownership  of  the  railroads.  I  do  not  share  in  that 
opinion,  because  it  is  easily  possible  for  the  public  to  protect  its 
commerce,  as  has  been  done  already  by  legislative  enactment.  I 
do  not  think  the  Government  will  resort  to  the  larger  measure 
when  the  smaller  is  sufficient.     The  question  whether  the  Govern- 


124  RAILROAD  STRIKES— THE  ANN  ARBOR  DECISION. 

ment  will  ever  own  and  run  the  railroads  is  too  large  to  be  an- 
swered here.  The  present  tendency  of  all  industrial  affairs  is  to 
larger  and  larger  organization.  Under  the  Government  is  the 
final  and  comprehensive  organization ;  but  I  am  no  prophet,  nor 
the  son  of  a  prophet.  It  is  quite  as  much  as  I  can  do  to  compre- 
hend in  a  faint  way  what  is  going  on  today  without  ]Dredicting 
what  will  occur  tomorrow. 

The  case  of  Lennon,  the  engineer,  who  was  adjudged  guilty  of 
contempt  in  refusing  to  obey  the  orders  of  the  court  in  regard  to 
handling  Toledo,  Ann  Arbor  and  Northern  Michigan  cars,  is  now 
before  the  Supreme  Court  of  the  United  States.  Lennon  was 
sent  to  jail  for  contempt.  An  application  was  made  to  the  circuit 
court  at  Toledo  for  his  release  on  a  writ  of  habeas  corpus^  which 
was  denied.  An  appeal  was  then  taken  to  the  United  States  Su- 
preme Court.  It  is  not  probable  that  the  motion  made  to  advance 
the  case  will  be  decided  at  this  term  of  the  court.  The  case  will 
then  go  over  to  the  October  term. 

The  questions  certified  to  the  Supreme  Court  for  its  decision 
are  the  following  questions  of  jurisdiction  presented  by  Lennon's 
petition,  filed  at  Toledo : 

'■'■  First.  Is  the  suit  in  which  the  order  is  made  against  Lennon  one  arising 
under  the  Constitution  or  laws  of  the  United  States  ? 

''Second.  Did  the  court  have  jurisdiction  of  the  person  of  the  petitioner  by 
reason  of  his  having  had  sufficient  notice  of  the  proceedings  and  order  in  the 
Ann  Arbor  case,  set  out  in  the  petition  ? 

"■Third.  Was  it  beyond  the  jurisdiction  of  a  court  of  equity  to  issue  the 
orders  made  in  the  case  ?" 

In  connection  with  this  question  of  the  attitude  of  the  law  to- 
ward strikes  and  strikers,  it  may  be  interesting  to  recall  the  great 
Missouri  Pacific  strike  in  1886. 

The  Missouri  Pacific  Railway,  including  leased  and  operated 
lines,  comprised  four  thousand  five  hundred  miles,  extending  from 
the  Mississippi  river  at  St.  Louis  and  at  Hannibal,  Mo.,  northward 
to  Omaha,  Neb. ;  southward  across  Arkansas  to  Texarkana,  and 
across  Indian  Territory  to  Fort  Worth;  and,  with  various  central 
ramifications,  westward  in  two  or  three  directions  from  St.  Joseph 
and  Kansas  City  into  southern  and  western  Kansas. 

At  ten  o'clock  in  the  morning  of  March  6th,  1886,  at  a  precon- 
certed signal,  given  by  steam  whistle  or  otherwise,  at  points  along 
the  line,  the  yardmen,  trackmen,  and  the  men  in  the  shops  and 
freight-houses  of  the  entire  system  quit  work. 

They  not  only  simultaneously  ceased  to  work,  but  also  seized 
the  company's  shops,  engine-houses,  freight  depots  and  yards, 
proclaiming  that  no  freight  should  l3e  moved  until  terms  were 
made  with  themselves.  They  enforced  this  position  by  removing 
from  great  numbers  of  engines  indispensible  pieces  connected 
with  each  cylinder,  "killing  "  the  engine,  as  they  term  it,  and  by 
threats  and  violence  intimidating  and  disabling  substitutes  em- 


RAILROAD  STRIKES— THE  ANN  ARBOR  DECISION. 


125 


ployed  by  the  company.  The  movement  of  freight  they  entirely 
prohibited  The  movement  of  passengers  and  mails  they  allowed 
to  go  on  in  a  disturbed  and  limited  way. 

The  men  who  did  this  numbered  about  three  thousand  seven 
hundred,  out  of  a  total  of  about  thirteen  thousand  four  hundred 
employes  of  all  classes  at  that  time  in  the  company's  service.  The 
remaining  employes,  engineers,  firemen,  conductors  and  trainmen 
generally  took  no  part  in  the  movement.  They  not  only  rendered 
to  the  company  such  service  as  its  circumstances  allowed  it  to  re- 
quire, but  from  time  to  time,  by  formal  resolution,  expressed  their 
disapproval  of  the  strike. 

It  may  be  fairly  said,  indeed  it  cannot  be  fairly  said  otherwise, 
that  but  for  acts  of  violence  done  by  the  strikers  to  the  property 
of  the  company  and  to  persons  who  attempted  to  go  to  work  in  its 
employ,  the  mere  quitting  of  work  by  yard  and  shop  men  to  the 
extent  of  one-fourth  of  the  whole  number  of  employes  would  not 
have  broken  up  commercial  traffic  even  for  a  day,  though  it  would 
have  delayed  repairs  and  put  the  company  to  inconvenience  and 
expense.  Complete  resumption  of  business  would  have  come  so 
much  earlier  as  to  make  the  inconvenience  to  the  public  com- 
paratively trifling.     As  it  was,  the  resumption  was  gradual. 

The  direct  loss  to  the  employes  of  the  company  in  wages,  was 
estimated  by  the  general  superintendent  at  one  million  dollars. 
The  greater  part  of  this  fell  upon  those  who  took  no  part  in  the 
movement,  who,  being  paid  by  the  mile  or  for  the  work  actually 
done,  lost  money  by  failure  of  employment.  The  direct  loss  to 
the  same  company  the  same  officer  in  his  testimony  computes  at 
twice  the  sum  above  mentioned. 

The  direct  loss  to  the  communities  affected — a  large  portion  of 
the  citizens  of  Missouri,  Kansas,  Arkansas  and  Texas — is  beyond 
approximate  statement.  Individual  estimates  in  great  numbers 
compute  the  actual  loss  of  business  at  an  average  of  perhaps  one- 
third  of  the  whole,  while  the  many  references  to  the  bright  busi- 
ness outlook  before  the  strike  contrast  almost  mournfully  with  the 
uniform  statements  of  the  loss  of  credit  and  confidence  caused  by 
it.  Public  expense  was,  moreover,  enhanced  by  large  necessities 
for  police  and  by  an  increase  of  crime. 

The  employes  who  were  examined  on  that  point  say  they  quit 
work  simply  because  of  an  order  which  they  obeyed.  This  order 
was  given  by  Martin  Irons,  a  machinist  of  Sedalia,  Mo. ,  who  was 
not  at  that  time  in  the  company's  employ. 

The  testimony  of  Irons  showed  that  four  days  before,  he  iiad 
issued  a  like  order  addressed  to  the  employes  of  the  Texas  Pacific 
Railway  Company,  then  in  the  hands  of  receivers  appointed  by 
the  circuit  court  of  the  United  States.  This  order  had  resulted 
in  a  stoppage  of  freight  traffic  on  that  railway ;  and  it  conclusively 
appears  that  the  order  addressed  to  employes  on  the  Missouri  Pa- 
cific was  conceived  and  executed  solely  as  a  means  of  enforcing 


126         RAILROAD  STRIKES— THE  ANN  ARBOR  DECISION. 

concessions  on  the  Texas  Pacific  through  an  assumed  connection 
of  the  two  which,  in  fact,  did  not  exist.  It  appears  also  that  Irons 
was  Master  Workman  of  District  Assembly  No.  loi,  of  the 
Knights  of  Labor,  a  secret  organization,  and  that  it  was  in  this 
connection  that  the  orders  above  mentioned  were  issued  and 
obeyed.  Control  of  the  situation  was  a  few  days  later  asserted 
openly  by  the  chiefs  of  this  organization,  and  their  testimony  and 
appearance  abundantly  identified  the  organization  itself  with  the 
inception  and  management  of  these  labor  troubles,  as  also  with 
their  results. 

I  summarize  some  suggestions  I  made  at  the  time  in  reference 
to  this  strike: 

The  most  instructive  exposition  of  what  has  been  done,  and  per- 
haps also  of  what  may  be  done,  in  one  direction  to  inhibit  strikes 
is  found  in  Stephen's  "  History  of  the  Criminal  Law,"  Volume 
III,  pages  202  to  207,  in  which  is  reviewed  in  the  history  of  Eng- 
lish legislation  and  jurisprudence  on  that  subject  from  the  passage 
of  the  statute  or  statutes  (for  there  were  two)  of  laborers,  enacted 
in  1349  and  1350,  to  the  Conspiracy  of  Protection  Act  of  1875,  in 
which  last  it  is  provided : 

First.  That  an  agreement  or  combination  by  two  or  more  persons  to  do  or 
to  procure  to  be  done  any  act  in  contemplation  or  furtherance  of  a  trade  dis- 
pute between  employers  and  workmen,  shall  not  be  indictable  as  a  conspiracy, 
if  such  act  committed  by  one  person  would  not  be  punishable  as  a  crime ;  that 
is,  an  offense  for  which  a  man  may  be  irnprisoned. 

Second.  That  every  person  who,  with  a  view  to  compel  any  other  person  to 
abstain  from  doing  or  to  do  any  act  which  such  person  has  a  legal  authority  to 
do,  uses  violence  to  or  intimidates  such  persons,  follows  him  about,  hides  his 
tools,  watches  or  besets  his  house,  or  follows  him  through  the  streets  in  a  dis- 
orderly way,  shall  be  liable  to  three  months'  hard  labor. 

Third.  That  every  one  who  willfully  and  maliciously  breaks  a  contract  to 
work  under  a  person  who  is  to  supply  gas  or  water,  or  any  contract  of  hiring 
or  service,  when  he  knows  or  ought  to  know  that  such  breach  of  contract  is 
likely  to  endanger  life,  cause  serious  bodily  injury,  or  expose  valuable  property 
to  destruction  or  serious  injury  shall  be  liable  to  three  months'  imprisonment. 

This  net  result  of  more  than  five  hundred  years  of  judicial  and 
legislative  experience  in  England  suggests,  first,  that  it  is  prob- 
ably not  practicable  in  this  country  to  make  punishable  by  law 
agreements  simultaneously  to  quit  work  when  there  is  no  violation 
of  a  previous  agreement  to  continue  working. 

Next,  that  where  the  public  service  and  convenience  are  involved 
with  the  maintenance  of  an  agreement  to  continue  working  so  that 
the  consequences  of  a  breach  of  that  agreement  will  fall  primarily 
and  principally  on  the  public,  it  is  in  such  a  case  in  harmony  with 
precedents  that  rest  on  long  experience  and  are  found  consonant 
with  English  liberty,  which  is  the  same  as  ours,  to  declare  that 
the  willful  inflicting  of  this  result  on  the  public  shall  be  deemed 
an  offense  against  the  public  and  punishable  as  a  crime. 

The  practical  application  of  this  would  be  an  enactment  that  the 
employe  of  a  company  engaged  in  interstate  commerce,  who  had 


RAILROAD  STRIKES— THE  ANN   ARBOR  DECISION.        '  127 

made  a  contract  terminable  only  upon  say  one  week's  or  ten  days' 
notice,  should,  upon  willfully  breaking  that  contract,  be  deemed 
guilty  of  a  misdemeanor.  If  this  were  done  and  if,  on  the  other 
hand,  the  company  were  required  to  employ  their  men  upon  con- 
tracts of  that  character  and  forbidden  to  discharge  except  upon 
such  notice,  one  practical  step  at  least  would  have  been  taken  to- 
ward the  avoidance  of  such  results.  Of  course  this  does  not  mean 
that  an  insubordinate  or  unsatisfactory  employe  should  be  con- 
tinued at  his  post,  but  only  that  unless  for  flagrant  cause  dis- 
charge should  be  either  on  reasonable  notice  in  advance  or  else 
accompanied  by  payment  of  wages  for  such  period  as  the  notice 
required  by  law  would  cover.  Something  like  this  has  been  for  a 
long  time  in  England  the  law  of  domestic  service. 

The  effect  of  such  a  system  of  time  contracts  upon  the  liability 
of  a  common  carrier  for  failure  to  receive  and  carry  persons  and 
property  upon  demand  is  also  worthy  of  attention.  It  is  obvious 
that  in  every  instance  of  a  strike  there  arises  a  multitude  of  in- 
stances in  w^hich  the  carrier  is  liable  for  damage  for  such  refusal, 
or  for  delay  or  damage,  unless  the  plea  of  interruption  by  the 
strike  can  be  successfully  interposed. 

In  the  one  case  known  to  me  in  which  this  question  has  been 
tested,  the  case  of  the  People  vs.  the  New  York  Central  and  Hud- 
son River  R.  R.  Co.,  28  Hun.  544,  decided  January,  1883,  it  was 
held  that  under  the  circumstances  in  that  case,  which  was  a  com- 
bined refusal  of  freight  handlers  to  work  for  less  than  a  given  price, 
the  defense  was  insufficient.  But  it  was  intimated  by  the  court  that 
if  it  had  been  shown  that  the  strike  of  the  New  York  Central 
laborers  had  been  caused  or  compelled  by  some  illegal  combina- 
tion or  organized  body  which  held  unlawful  control  of  their  action, 
and  which  sought  through  them  to  enforce  its  will  upon  the  com- 
pany, and  that  the  company  had  used  all  the  means  in  its  power 
to  employ  other  men  in  sufficient  numbers  to  do  the  work,  a  very 
different  case  for  the  exercise  of  the  discretion  of  the  court  would 
have  been  presented. 

In  other  words,  the  question  whether  or  not  the  company  was 
pecuniarily  responsible  to  individual  sufferers  by  the  interruption 
of  commerce,  was  held,  as  seems  obviously  just,  to  be  simply  a 
question  of  whether  the  company  had  made  all  proper  efforts  to 
carry  on  its  business. 

If  it  were  made  plain  in  such  cases,  as  would  be  the  result  of 
such  a  law,  that  the  company  had  reasonable  notice  that  the  men 
would  quit  work  at  such  a  time  if  their  demands  were  not  com- 
plied with,  and  was  therefore  without  excuse  and  was  liable  for 
damages  for  all  persons  and  goods  delayed  or  injured;  and  if  the 
companies  furthermore  were  restricted  from  discharging  a  man 
except  upon  a  week  or  ten  days'  notice,  and  from  filling  the  places 
of  men  who  quit  or  were  discharged  except  with  men  whom  the 
company  was  willing  to  keep  in  its  employ,  or  at  least  to  pay 


128        RAILROAD  STRIKES— THE  ANN  ARBOR  DECISION. 

wages  to,  for  some  such  length  of  time;  this  apparently  would 
furnish  a  good  and  sufficient  counterpart  for  any  disadvantage  to 
the  employes  from  a  statute  making  it  a  misdemeanor  to  quit 
work  before  the  expiration  of  their  contracts. 

In  other  words,  if  common  carriers  engaged  in  interstate  com- 
merce and  their  employes  were  forbidden  by  law,  the  one  to 
discharge  and  the  other  to  quit,  except  upon  notice  given  by  one 
to  the  other  a  reasonable  time  in  advance,  no  one  could  be  materi- 
ally prejudiced,  while  a  salutary  check  would  be  imposed  upon 
both  against  those  evils  which  the  commerce  of  the  country  has 
experienced.  The  company,  if  it  received  notice  from  a  great 
number  of  its  employes  at  once  that  they  proposed  to  quit  would 
refuse  no  reasonable  demand  for  fear  of  liability  in  case  of  failure 
to  forward  goods  and  persons  as  required  by  its  duty  to  the  public ; 
the  men,  on  the  other  hand,  would  shrink  from  any  unreasonable 
demand,  as  that  would  stimulate  the  company  to  extraordinary 
efforts  to  supply  their  places  within  the  time  that  must  elapse 
before  they  would  be  free  to  quit. 

Add  to  this  an  amendment  of  Revised  Statute,  No.  5,519,  giving 
to  persons  and  carriers  employed  in  commerce  among  the  states 
the  same  protection  which  that  section  was  originally  meant  to 
give  to  civil  rights,  and  in  the  same  way  enlarge  the  statute  with 
reference  to  obstructing  or  hindering  mails,  so  that  it  shall  protect 
also  interstate  commerce  equally  with  the  mails;  then  commerce 
and  mails  will  be  alike  secure — crime  only  will  be  under  increased 
penalties,  while  neither  carriers,  nor  their  employes,  will  have 
yielded  of  their  liberties  anything  beyond  the  power  to  break  off 
without  penalty  from  a  contract  freely  made  where  the  public 
good  is  involved  with  its  performance. 

New  York  City. 


SERVICE  or  A  BUREAU  OE  RAILWAY  STATIS- 
TICS AND  ACCOUNTS  IN  THE  SOLUTION 
OE  THE  RAILWAY  QUESTION. 

By  Prof.  Henry  C.  Adams., 

Statistician  Interstate  Commerce  Commission. 

A  rapid  survey  of  the  history  of  internal  communication  in  the 
United  States  shows  that  four  distinct  views  have  been  held  re- 
specting the  relation  of  public  highways  to  government.  Previous 
to  1830,  it  was  commonly  accepted  as  the  proper  function  of  the 
Federal  government  to  supply  the  public  with  turnpikes  and  canals, 
the  only  important  public  work  undertaken  by  a  state  prior  to  this 
time  being  the  Erie  canal.  With  1830,  however,  the  sentiment  of 
the  country  entirely  changed.  The  constitutional  right  of  Con- 
gress to  build  and  manage  public  highways  within  the  boundaries 
of  the  sovereign  states  was  questioned.  The  veto  by  President 
Jackson  of  the  Maysville  road  bill  transferred  the  center  of  activity 
from  the  Federal  government  to  the  several  states,  and  from  1830 
to  1850  the  question  of  internal  improvements  brought  state 
governments  prominently  into  view.  I  need  not  speak  of  the 
financial  disasters  which  resulted  from  this  endeavor  on  the  part 
of  the  states  to  build  railways  and  canals.  Suffice  it  to  say  that 
by  1850  public  sentiment  experienced  another  radical  change,  and 
the  people  of  the  states  adopted  numerous  amendments  to  their 
constitutions  which  forbade  the  use  of  public  credit  for  commer- 
cial purposes.  At  present  there  are  a  large  number  of  provisions 
of  this  sort  in  the  state  constitutions. 

The  third  phase  of  public  opinion,  which  may  be  said  to  have 
been  entered  upon  by  1850,  regarded  private  corporations  as  the 
proper  organizations  for  building  and  controlling  railways.  It  will 
be  remembered  that  at  this  time  the  extreme  ideas  of  English  po- 
litical economy  respecting  the  narrow  functions  of  government 
were  quite  prevalent,  and  it  is  no  occasion  for  surprise  to  notice 
that  when  ownership  and  control  of  railways  was  handed  over  to 
private  corporations,  the  governments  of  the  several  states  did  not 

Paper  read  at  National  Convention  of  Railroad  Commissioners  held  at  Washington,  D.  C, 

April,  1893. 

9 


130      SERVICES  OF  A  BUREAU  OF  RAILWAY  STATISTICS. 

consider  it  necessary  to  retain  any  voice  in  their  management.  It 
was  believed  that  competition  would  work  with  regard  to  this  in- 
dustry in  a  normal  and  satisfactory  manner,  and  that  consequently 
there  was  no  necessity  for  government  to  provide  for  the  exercise 
of  any  control  or  supervision. 

This  sentiment  prevailed  until  about  1870,  when  it  was  found, 
especially  in  certain  of  the  western  states,  that  an  irresponsible 
administration  of  the  transportation  industry  had  led  to  many  evils 
of  which  the  public  might  justly  make  complaint.  Finding  no 
redress  at  the  hands  of  railway  managers,  appeal  was  made  to  the 
sovereign  power  of  the  states,  resulting  in  the  passage  of  those 
laws  known  as  the  "Granger  Laws,"  which  asserted  the  right  of 
public  control  over  internal  commerce.  This  brings  us  to  the 
fourth  phase  of  public  sentiment  referred  to.  I  do  not,  of  course, 
mean  to  say  that  no  laws  attempting  to  regulate  railway  business 
existed  previous  to  1870;  but  rather  that  the  sentiment  favoring 
regulation  was  not,  prior  to  this  time  sufficiently  strong  to  be  re- 
garded as  the  prevailing  sentiment  of  the  country. 

The  necessity  for  regulation  being  established,  the  question  re- 
specting the  proper  method  of  regulation  came  to  be  one  of  import- 
ance. Without  rehearsing  the  various  opinions  upon  this  point, 
it  may  be  said  that  the  country  at  the  present  time  seems  to  have 
accepted  the  idea  that  the  railway  problem  is  to  be  solved  through 
the  medium  of  railway  commissions. 

I  have  called  your  attention  to  these  changes  in  public  senti- 
ment for  the  purpose  of  impressing  the  fact  that  the  control  of 
railways  through  commissions  is  an  experiment  rather  than  an  es- 
tablished policy.  As  sentiment  has  changed  in  the  past,  so  it  may 
change  in  the  future.  The  people  of  this  country  do  not  grant 
their  support  for  any  considerable  length  of  time  to  an  idea  which 
fails  to  justify  itself  when  put  on  trial,  and  it  may  be  well  for  the 
members  of  this  convention,  representing  as  they  do  the  various 
railway  commissions  of  the  United  States,  to  hold  in  mind  the  fact 
that  unless  their  work  is  aggressive  in  character  and  decidedly 
beneficial  in  result  the  support  of  public  sentiment  will  sooner  or 
later  be  withdrawn.  It  is  therefore  pertinent  to  inquire  if  every 
means  which  the  law  places  at  the  disposal  of  railway  commission- 
ers is  now  being  used  for  the  solution  of  the  railway  problem.  It 
is  of  the  utmost  importance  that  a  political  experiment  when  once 
undertaken  should  be  thoroughly  tried,  in  order  that,  should  it 
prove  unsuccessful,  it  need  not  be  recurred  to  again  in  the  future. 
There  is  no  other  guarantee  that  change  will  be  progress. 

Without  entering  into  a  general  discussion  of  the  efficiency  of 
commissions  when  compared  with  the  powers  bestowed  by  legis- 
latures, I  desire  to  call  attention  to  one  instrument  of  control 
which  the  law  has  placed  in  their  hands,  of  which  adequate  use  is 
not  made.  I  refer  to  the  power  bestowed  on  every  railway  com- 
mission in  this  country  to  secure  statistical  returns  from  railway 


SERVICES  OF  A  BUREAU  OF  RAILWAY  STATISTICS.       131 

corporations  over  which  they  have  jurisdiction.  The  control  of 
railway  corporations  through  the  medium  of  a  bureau  of  railway 
statistics  and  accounts  may  seem  at  first  an  idea  which  none  but  a 
pedant  would  entertain ;  but  I  am  sure  you  will  grant  me  your 
candid  attention  while  presenting  a  few  considerations  in  its  sup- 
port. 

The  railway  problem  is  capable  of  quite  a  number  of  definitions, 
according  as  it  is  regarded  from  a  technical  or  from  a  general 
point  of  view.  I  shall  confine  my  consideration  for  the  present  to 
the  definition  of  the  problem  implied  in  the  laws  creating  the 
various  commissions.  It  is  true  that  legislative  enactments  do  not 
contain  any  formal  definition;  they  do,  however,  if  we  consider 
the  acts  by  which  these  laws  are  declared  to  be  illegal,  clearly  in- 
dicate the  nature  of  the  railway  problem  as  it  lay  in  the  minds  of 
those  who  framed  the  laws.  From  this  point  of  view,  we  may  say 
the  railway  problem  consists  in  securing  to  all  shippers  equality  of 
opportunity  in  the  use  of  railway  facilities  at  just  and  reasonable 
rates.  Our  question,  therefore,  resolves  itself  to  this :  How  can  a 
bureau  of  statistics  and  accounts  aid  the  commissions  in  establish- 
ing and  maintaining  equality  of  opportunity  and  just  rates  in  the 
use  of  railway  facilities?  In  endeavoring  to  answer  this  question, 
I  shall  confine  myself  to  three  points :  First,  the  enforcement  of 
the  law  against  discrimination.  Second,  the  determination  of  just 
rates ;  and  third,  the  maintenance  of  stable  rates.  If  I  can  show 
that  a  strict  control  over  railway  accounts  is  necessary  in  order  to 
do  away  with  discriminations  and  to  provide  for  just  and  stable 
rates,  it  must  certainly  be  admitted  that  a  bureau  of  railway 
statistics  and  accounts  is  an  essential  part  of  the  machinery  by 
which  the  commission  idea  is  to  be  realized. 

HOW    MAY    A    BUREAU    OF     STATISTICS     AND     ACCOUNTS    ASSIST    IN    THE 
ENFORCEMENT    OF    LAWS    AGAINST    DISCRIMINATION  ? 

Laws  which  declare  certain  things  illegal  are  of  two  sorts — those 
which  rely  upon  police  power  to  insure  compliance  with  their  re- 
quirements, and  those  which  are  so  adjusted  to  the  prejudices  and 
interests  of  the  persons  whom  they  concern  that  they  are  self-ex- 
ecutory in  character.  A  factory  law,  or  a  law  which  provides  for 
safety  in  mines,  is  of  the  first  class ;  a  law  which  provides  for  the 
enforcement  of  commercial  contracts  by  legal  procedure,  belongs 
to  the  second  class.  The  distinction  is  that  in  the  first  class  the 
interests  at  stake  are  of  a  general  character,  and  the  persons  whom 
the  law  directly  affects  are  not  immediately  interested  in  its  en- 
forcement; whereas  in  the  second  class,  the  guarantee  that  the 
law  will  be  enforced  is  found  in  the  direct  and  personal  interests 
of  the  parties  concerned.  One  can  not  determine  from  reading 
the  various  acts  creating  railway  commissions  to  which  class  of 
laws  these  acts  belong.  Holding  in  mind  the  strong  commissions, 
like  those  of  Illinois  and  Iowa,  rather  than  commissions  which  are 


132       SERVICES  OF  A  BUREAU  OF  RAILWAY  STATISTICS. 

supervisory  in  character,  like  those  of  Michigan  and  Massachusetts, 
commissioners  may  render  opinions  in  cases  presented  to  them,  or 
they  may  themselves  originate  cases ;  they  may  act  as  an  admin- 
istrative court,  or  they  may  exercise  visitorial  powers  and  assume 
the  functions  of  a  prosecutory  agency.  The  character  of  the 
laws  in  this  regard  is  determined  by  the  policy  which  commission- 
ers see  fit  to  adopt  in  their  execution. 

Now,  it  is  no  secret  that  under  present  conditions  it  is  exceed- 
ingly difficult  for  the  shipper  whose  rights  are  invaded  by  a  rail- 
way corporation  to  secure  quick  and  speedy  relief;  and  on  that 
account  shippers  conceive  their  interests  to  depend  upon  the  good 
will  of  railway  managers  rather  than  upon  commissions  or  courts, 
and  consequently  refuse  to  bring  their  cases,  with  all  the  evidence 
necessary  to  secure  conviction,  to  the  attention  of  commissioners. 
Under  such  circumstances,  a  sufficient  number  of  cases  do  not 
arise  spontaneously  to  enable  commissioners  to  exercise  a  control- 
ling influence  over  the  administration  of  railway  affairs,  and  the 
result  is,  they  feel  themselves  obliged  to  undertake  the  enforce- 
ment of  the  laws  by  the  exercise  of  visitorial  functions,  or  by  the 
direct  instigation  of  cases.  It  is  not  necessary  to  discuss  the  wis- 
dom of  this  policy.  It  is  adopted  as  a  temporary  expedient,  and,  I 
doubt  not,  with  the  expectation  that  the  necessity  for  it  will,  sooner 
or  later,  pass  away.  The  real  purpose  of  commissioners  must  cer- 
tainly be  to  sit  as  a  tribunal  (I  will  not  say  court),  deciding  cases 
which  are  presented  to  them,  rather  than  to  seek  out  cases  in 
which  the  lav/  is  disregarded. 

The  question,  then,  naturally  arises,  what  can  be  done  to  create 
those  legal  and  commercial  conditions  under  which  this  end  may 
be  attained.  How  may  the  railway  laws  of  the  United  States  be 
made  self -executory  in  character?  Under  what  conditions  will 
shippers  appeal  :o  the  commissions,  bringing  their  evidence  with 
them  rather  than  suppressing  evidence,  use  it  as  a  lever  to  force 
special  favors  from  railway  managers?  The  establishment  of  such 
conditions  is  essential,  in  my  opinion,  to  the  solution  of  the  rail- 
way problem  by  commissions,  for  it  goes  without  saying,  that  a 
law  against  discrimination  by  common  carriers  cannot  be  enforced 
so  long  as  both  carriers  and  shippers  are  interested  in  the  law's 
defeat. 

I  do  not,  of  course,  undertake  to  state  all  the  conditions  neces- 
sary for  the  self-enforcement  of  our  railway  laws,  but  I  may  call 
your  attention  to  one  step  which  must  be  taken  for  the  realization 
of  this  end.  In  order  that  the  law  against  discrimination  in  rates 
may  be  self-enforced  there  must  be  a  uniformly  organized  and 
uniformly  administered  railway  system.  Managers  cannot  be 
allowed  the  liberty  of  adopting  unusual  methods  of  business,  nor 
attorneys  the  right  of  urging  before  the  commission  peculiar  poli- 
cies of  management,  as  defense  for  unusual  methods.  All  orders 
pertaining  to  transportation  must  be  clear,  simple  and  easily  un- 


SERVICES  OF  A  BUREAU  OF  RAILWAY  STATISTICS.       133 

derstood.  Under  these  conditions  shippers  would  come  to  know 
their  rights,  and  in  case  their  rights  were  disregarded  by  carriers, 
they  would  undertake  to  secure  redress  or  to  prove  their  claims 
for  damages.  Now  the  easiest  way,  indeed  the  only  way,  or  at 
least  the  first  step  toward  the  way,  by  which  uniformity  of  man- 
agement may  be  secured  is  to  establish  uniformity  in  accounts  and 
to  take  from  railway  officials  the  right  of  adjusting  their  accounts 
in  an  arbitrary  manner.  Accounts,  if  they  be  honest,  are  true  re- 
cords of  administration,  and  he  who  controls  accounts  can,  in  a 
large  measure,  control  the  policy  of  management.  Should  the 
form  of  bookkeeping  be  determined  by  commissions,  and  all  rail- 
ways be  obliged  to  adjust  their  accounts  to  uniform  rules,  the  com- 
missioners would  be  in  a  position  to  impose  their  ideas,  in  a  very 
large  measure,  upon  the  management  of  the  roads.  And  what  is 
more  important,  they  would  be  in  a  position  to  secure  evidence 
against  a  carrier  guilty  of  discrimination  more  easily  than  at  the 
present  time.  And  more  than  this,  uniformity  in  accounts  and 
strict  supervision  over  them  provides  a  new  way  of  testing  the 
compliance  of  the  carriers  with  the  rules  of  the  commissioners. 
Statistics  properly  used  and  adequately  guided  are  the  surest 
means  of  detecting  any  general  departure  from  established  rules 
of  management,  and,  if  commissions  must  continue  visitorial  func- 
tions, will  indicate  where  it  is  worth  while  to  undertake  special 
investigation. 

It  is  unnecessary  to  develop  this  thought  further,  for  by  these 
suggestions  you  will  at  once  see  how  far  it  goes.  The  railway 
laws  in  this  country  are  not,  at  present,  self-executory  in  character, 
because  of  the  difficulty  of  securing  evidence  against  discrimina- 
tion. And  this,  in  a  large  measure,  is  due  to  the  numberless  and 
complex  methods  by  which  railways  do  their  business.  My  claim 
is  that,  in  order  to  enforce  a  law  which  makes  discrimination  ille- 
gal, it  will  be  necessary  to  crystalize  the  railways  of  the  country 
into  a  common  system  so  far  as  principles  of  control  are  concerned, 
and  to  oblige  them  to  follow  uniform  rules  in  business  manage- 
ment. This,  it  is  believed,  can  be  the  most  easily  accomplished 
through  the  agency  of  a  well  equipped  and  well  directed  statisti- 
cal bureau,  which  shall  impose  upon  the  railways  a  uniform  sys- 
tem of  accounts.  In  many  of  our  states  it  is  not  necessary  that 
additional  power  shall  be  asked  from  the  legislators,  for  the  Inter- 
state Commerce  Commission,  as  also  eleven  state  commissions 
already  have  the  right  to  determine  the  form  in  which  railway 
accounts  shall  be  kept.  The  propriety  of  enforcing  these  provi- 
sions is  a  question  properly  debatable  by  this  convention. 

HOW    MAY    JUST    RATES    BE    DETERMINED  ? 

It  is  not  too  much  to  say  that  the  kernel  of  the  railway  problem 
lies  in  the  establishment  of  a  policy  for  determining  rates  that 
shall  be  generally  accepted  as  based  on  justice  and  reason.     This 


134 


SERVICES  OF  A  BUREAU  OF  RAILWAY  STATISTICS. 


is  implied  in  the  laws  so  far  as  they  touch  the  question.  To  this 
end  the  Interstate  Commerce  Commission  and  seventeen  state 
commissions  are  clothed  with  the  power  of  adjusting  rates.  If 
the  commission  idea  finally  breaks  down,  it  will  be  because  com- 
missions are  unable  to  deal  with  this  vexed  question. 

At  present  they  are  not  in  a  position  to  deal  with  the  question, 
for  there  is  no  generally  accepted  theory  respecting  the  basis  of 
railway  rates,  and  consequently,  there  can  be  no  uniformity  in 
their  decisions.  It  is  doubtless  the  consciousness  of  this  fact  which 
makes  commissioners  so  reluctant  to  exercise  the  power  of  adjust- 
ing rates  in  those  cases  where  the  law  grants  them  that  power, 
and  which  makes  the  legislators,  in  those  states  where  the  rate- 
making  power  is  not  granted  to  commissioners,  hesitate  in  con- 
ferring the  grant.  Commissioners  are  in  no  position  at  present  to 
judge  clearly  with  regard  to  the  respective  claims  of  shippers, 
stockholders,  and  the  public,  for  they  have  no  facts  to  work  upon 
at  all  adequate  to  the  magnitude  of  the  problem.  If  there  be  any 
generally  accepted  theory  it  is  that  rates  should  bear  some  relation 
to  cost  of  service.  But  commissioners  are  in  possession  of  no  in- 
formation respecting  the  cost  of  service  that  is  of  the  slightest  as- 
sistance in  the  application  of  this  theory.  It  is,  however,  absurd 
to  speak  of  determining  a  just  price  with  regard  to  any  commodity 
whatever  without  having  first  determined  the  conditions  of  pro- 
duction. For  the  purpose  of  avoiding  an  extended  discussion  of 
the  theory  of  rate-making  rather  than  because  I  conceive  my  views 
to  be  of  especial  importance,  I  may  perhaps  be  permitted  to  sug- 
gest what,  in  my  opinion,  is  a  practicable  policy  for  the  adjust- 
ment of  railway  charges. 

The  rule  that  specific  railway  rates  should  be  determined  by 
specific  cost  of  service,  appears  to  me  to  be  wholly  untenable,  and 
the  practice  of  charging  "  what  the  traffic  will  bear,"  as  applied 
by  railway  managers,  to  be  incapable  of  defense.  Provided,  how- 
ever, it  be  applied  in  such  a  manner  as  to  assign  total  of  cost  of 
carrying  traffic  to  the  various  classes  of  freight  carried,  and  not  to 
the  determination  of  a  rate  which  will  secure  the  largest  aggre- 
gate income,  I  see  no  reason  why  it  cannot  be  accepted  as  a  safe 
rule  for  commissions  to  follow.  The  process  of  rate-making,  ac- 
cording to  this  idea,  would  be  as  follows :  Determine,  in  the  first 
place,  the  income  which  a  railway  corporation  actually  needs. 
Determine,  in  the  second  place,  the  business  which  rightly  belongs 
to  the  corporation  by  virtue  of  its  relation  to  the  source  and  des- 
tination of  freight.  In  the  third  place,  classify  all  freight  accord- 
ing to  a  uniform  classification.  The  process  of  rate-making  would 
then  be  to  adjust  rates  to  the  various  classes  of  freight  in  such  a 
manner  that  the  required  gross  income  may  be  secured  to  the  com- 
pany and  the  burden  of  payment  rest  as  lightly  as  possible  on  the 
customers  of  the  railways.  The  principles  which  lie  at  the  basis  of 
just  railway  schedules  arise  from  a  study  of  the  theory  of  taxation. 


SERVICES  OF  A  BUREAU  OF  RAILWAY  STATISTICS. 


135 


As  in  taxation  payment  for  the  support  of  government  should 
be  in  proportion  to  the  ability  of  citizens,  so  the  contributions  of 
shippers  to  the  fund  necessary  to  meet  the  legitimate  demands  of 
railways  should  be  made  from  various  classes  of  goods  in  propor- 
tion to  their  ability  to  bear  the  charges.  If  this  theory  of  rate- 
making  be  accepted,  or  indeed  any  theory  which  regards  the 
problem  from  the  standpoint  of  public  interest,  the  determination 
of  rates  comes  to  be  a  purely  statistical  problem,  or  at  least,  a 
problem  that  calls  for  decisions  that  can  only  be  given  on  the 
fullest  and  completest  information  as  to  facts.  Railway  commis- 
sioners do  not  have  at  their  command  the  range  of  facts  which  are 
the  common  property  of  railway  managers.  How,  then,  is  it  pos- 
sible for  commissioners  to  exercise  a  controlling  voice  in  railway 
management,  or  indeed  to  decide  justly  and  wisely  on  such  ques- 
tions as  are  presented  to  them? 

Should  this  general  view  of  the  case  be  accepted,  the  next  step 
in  the  further  development  of  statistical  work  lies  very  clearly 
before  us.  It  consists  in  perfecting  a  uniform  classification  of 
freight  throughout  the  country  and  in  securing  from  railways  a 
statement  of  the  amount  of  freight  carried  in  each  class  and  of  the 
amount  of  revenue  which  each  class  of  freight  yields.  Such  an 
investigation,  if  carried  on  so  as  to  permit  territorial  localization 
of  freight  by  classes,  would  place  the  commissioners  in  a  position 
to  judge  what  industrial,  or,  indeed,  social  results,  would  follow 
from  changing  any  special  schedule  of  a  particular  railway. 

It  is  considerations  such  as  these,  and  many  others  that  might 
be  mentioned  along  the  same  line,  which  lead  me  to  assert  that  no 
commission  can  safely  undertake  the  adjustment  of  railway  rates 
except  upon  the  basis  of  a  thorough  and  somewhat  extended  statis- 
tical investigation.  A  just  rate  does  not  mean  a  rate  which  a  particu- 
lar shipper  can  pay  for  particular  goods,  but  rather  a  rate  which, 
when  enforced  and  maintained,  entails  in  a  community  just  and 
commendable  results.  The  question  involved  in  this  controversy 
is  not  simply  commercial  in  character,  it  is  at  the  same  time  a 
question  of  public  policy,  and  as  such,  like  all  questions  of  a  politi- 
cal character,  demands  the  fullest  and  completest  knowledge  re- 
specting it.  A  statistical  bureau  is  not  an  ornamental  decoration. 
It  is  an  essential  part  of  the  machinery  for  the  control  of  rail- 
ways. 

If  the  commission  idea  is  to  retain  the  confidence  of  the  public, 
it  is,  in  my  opinion,  essential  that  the  commissioners  recognize 
the  service  which  a  bureau  of  statistics  and  accounts  may  render 
them  in  the  performance  of  their  duties,  and  for  legislatures  to 
grant  such  appropriations  as  are  necessary  for  the  development 
and  extension  of  statistical  work.  We  cannot  evade  the  conclu- 
sion that  the  public  has  no  guarantee  that  rates  will  be  just  and 
reasonable,  whether  made  by  commissioners  or  by  the  managers 
of  railways,  except  they  be  made  after  a  full  investigation  into  the 
conditions  under  which  the  service  is  rendered.   . 


136      SERVICES  OF  A  BUREAU  OF  RAILWAY  STATISTICS. 

HOW    MAY    RATES    BE    MAINTAINED? 

It  is  recognized  that  rates  must  be  stable  as  well  as  just  and 
reasonable  The  question  therefore  forces  itself  upon  us,  under 
what  conditions  may  stable  rates  be  secured?  The  remarks  which 
have  previously  been  made  respecting  discrimination  in  rates 
apply  equally  well  to  this  question,  for  rates  are  rendered  unstable 
through  discrimination ;  and  commissioners  may  regard  it  wise  to 
postpone  a  direct  consideration  of  the  means  by  which  stability  of 
schedules  may  be  maintained  until  it  is  observed  whether  or  not 
fluctuations  in  rates  will  continue  after  discrimination  between 
shippers  and  places  is  done  away  with.  I  should  not,  however, 
make  a  complete  statement  of  the  service  of  a  bureau  of  statistics 
and  accounts  in  the  solution  of  the  railway  problem  were  I  not  to 
say  that  in  all  probability  something  more  will  be  required  to 
secure  stablity  of  schedules  than  the  elimination  of  personal  dis- 
crimination from  railway  practice.  There  are  many  who  believe 
that  stable  rates  cannot  be  secured  so  long  as  railways  are  pro- 
hibited from  entering  into  legal  agreements  respecting  the  con- 
ditions under  which  their  business  shall  be  managed.  It  is  as- 
serted that  the  railway  industry  from  its  very  nature  tends  toward 
consolidation ;  that  concentration  of  power  is  inevitable ;  and  that 
the  only  question  for  the  public  to  consider  is  how  to  use  this 
power  for  the  public  good.  In  railway  consolidation  there  is  at 
least  the  possibility  of  cheaper  and  better  service,  and  providing 
that  they  who  control  it  are  held  to  strict  responsibility,  there  is 
no  reason  why  it  should  be  feared  by  the  public.  This,  of  course, 
means  that  great  reliance  must  be  placed  upon  the  principle  of 
publicity,  for  there  is  no  other  way  by  which  trustees  of  a  public 
power  may  be  held  to  account. 

In  working  out  for  my  own  satisfaction  the  conditions  under 
which  pooling  might  be  safely  permitted  to  railways,  the  fact 
which  has  been  most  forcibly  impressed  upon  me  is  that  no  traffic 
agreements  could  last  for  any  considerable  length  of  time,  except 
under  the  application  of  what  is  technically  known  as  the  principle 
of  territorialization.  The  strongest  argument  for  this  conclusion 
is  found  in  the  outline  maps  for  competitive  roads,  published  by 
Rand,  McNally  &  Co.  When,  for  example,  the  Michigan  Central 
Railroad  is  permitted  to  compete  for  freight  between  New  York 
and  New  Orleans;  of  what  avail  would  it  be  for  the  roads  to  which 
that  freight  naturally  belongs  to  enter  into  an  agreement  as  to  the 
manner  in  which  it  shall  be  divided?  No  pooling  contracts  could 
possibly  be  stable  while  such  conditions  existed.  Pooling  means 
the  limitation  of  competition, or  what  amounts  to  the  same  thing, 
an  agreement  respecting  the  conditions  under  which  competition 
shall  take  place.  The  first  step,  therefore,  toward  the  establish- 
ment of  stable  rates  through  the  legalization  of  pools  would  be  a 
scientific  classification  of  railways  by  which  each  company  may 
know  what  freight  it  can  legitimately  carry.     This  is  doubtless  an 


SERVICES  OF  A  BUREAU  OF  RAILWAY  STATISTICS. 


137 


extension  of  public  authority  beyond  any  which  has  thus  far  been 
contemplated  by  our  laws,  but  there  is  no  other  way  of  bringing 
the  matter  under  control  so  as  to  adequately  guard  the  public  in- 
terest. It  follows,  therefore,  that  if  pooling  be  forced  upon  gov- 
ernment by  the  continual  wars  of  railways  the  government  must 
establish  and  support  well-equipped  statistical  bureaus ;  for  it  is 
inconceivable  that  a  scientific  classification  of  railways  can  be 
made  and  maintained,  except  upon  the  basis  of  careful  and  ex- 
haustive statistical  investigation. 

It  seems,  then,  whether  we  consider  the  question  of  railway 
discrimination,  of  just  and  reasonable  rates,  or  of  stability  in  rates, 
that  a  bureau  designed  especially  for  investigation  and  for  impos- 
ing upon  the  railways  uniform  methods  of  management  is  essen- 
tial to  the  realization  of  the  commission  idea.  This  has  not  been 
adequately  recognized  in  the  past,  and  it  rests  very  largely  with 
the  members  of  this  convention,  whether  it  shall  be  recognized  in 
the  future. 

I  have  presented  the  above  considerations  favoring  maintenance 
and  development  of  the  statistical  branch  of  the  service  of  rail- 
way commissions,  holding  in  mind  the  definition  of  the  railway 
problem  as  implied  in  the  laws  creating  the  commission.  But 
this  definition  is  not  as  broad  as  the  problem  itself,  and  I  see  no 
reason  why  commissioners  ,  are  not  justified  in  taking  the  most 
comprehensive  view  of  their  office  and  in  administering  it  in  such 
a  manner  that  incidental,  as  well  as  general,  benefits  may  be 
secured  therefrom  to  the  public. 

Looking  at  the  matter  in  the  light  of  history,  railways,  as  ad- 
ministered, have  destroyed  the  conditions  under  which  the  princi- 
ple of  competition  can  work  for  the  great  rank  and  file  of  business 
in  a  normal  and  satisfactory  manner.  In  theory,  competition  is 
the  central  principle  of  our  industrial  structure.  Both  legislators 
and  courts  assume  it  to  be  present  in  the  great  majority  of  cases, 
and  because  of  their  confidence  in  its  potency  they  deny  the  per- 
tinency of  socialistic  arguments.  In  fact,  however,  competition 
has  degenerated  into  a  struggle  for  existence  between  great  cor- 
porations, or  a  struggle  for  special  favors  at  the  hand  of  great 
corporations,  or  it  has  ceased  to  exist  altogether.  In  this  lies 
the  explanation  of  most  of  the  industrial  complications  which 
perplex  the  nineteenth  century.  According  to  the  common  law 
of  industries,  competition  is  potent ;  but,  in  reality,  competition  is 
rendered  impotent  by  the  arbitrary  manner  in  which  railway 
managers  administer  their  trusts.  If  this  be  true,  and  that  it 
finds  adequate  support  in  the  history  of  the  nineteenth  century 
lies  beyond  reasonable  controversy,  the  railway  problem  comes  to 
be  a  problem  of  civilization.  It  is  a  question  of  keeping  open  the 
avenues  of  opportunity.  There  is  involved  in  its  solution  the 
broad  question  of  industrial  liberty,  and  the  technicalities  of  railway 
legislation  take  upon  themselves  a  new  meaning  when  one  con- 


138      SERVICES  OF  A  BUREAU  OF  RAILWAY  STATISTICS. 

siders  the  true  character  and  the  industrial  influence  of  railway 
transportation.  As  equality  before  the  law  is  a  canon  of  political 
liberty,  so  equality  before  the  railways  is  a  canon  of  industrial 
liberty.  A  solution  of  the  railway  problem  means  the  reintroduc- 
tion  of  those  conditions  under  which  competition  can  control  in- 
dustrial forces  and  deal  justly  as  between  industrial  agents. 

Such  considerations  as  the  above  are  pertinent  at  the  present 
time  when  the  question  of  granting  increased  power  to  railway 
commissions  is  before  the  public.  It  would  be  impossible  for  a 
Bureau  of  Railway  Statistics  and  Accounts  to  perform  the  service 
which  has  been  assigned  to  it,  except  it  be  clothed  with  ample 
authority  and  provided  with  adequate  facilities.  Without  doubt 
the  railway  corporations  would  assert  that  in  the  exercise  of  its 
functions  such  a  bureau  would  be  inquisitorial  and  encroach  upon 
the  established  rights  of  privacy.  But  if  it  be  clearly  apprehended 
that  the  question  of  industrial  liberty  is  involved,  that  the  freedom 
of  opportunity  whiph  our  common  law  asserts  to  be  the  right  of 
every  citizen  is  jeopardized  by  the  manner  in  which  railways  do, 
as  a  matter  of  fact,  manage  their  affairs,  there  comes  to  be  a  reason 
for  the  extension  of  powers  which  commissioners  demand  from 
legislators.  One  thing  certainly  is  clear — -in  an  industry  which 
touches  at  every  point  the  life  and  the  prospects  of  all  citizens, 
there  ought  to  be  no  question  respecting  the  right  of  govern- 
ment to  make  the  fullest  and  completest  investigation. 


ENGLISH  AND  AMERICAN  RAILWAYS-A 
COMPARISON  AND  A  CONTRAST. 

Mr.  W.  M.  Acworth,  of  England. 

I  am  asked  to  institute  a  comparison  between  English  and 
American  railways  in  their  leading  features ;  and  so  far  as  limits 
of  space  permit  I  will  endeavor  to  do  so.  The  first  point  of  differ- 
ence which  strikes  one  is  the  vastly  greater  attention  paid  to  rail- 
way questions  with  you  than  with  us.  "Whatever  can  you  find 
in  railways  to  write  about;  it  is  such  a  dull  subject,"  has  been  re- 
marked to  the  present  writer  times  without  number.  Various 
causes  are  accountable  for  this  neglect.  Journalistic  ignorance  of 
the  subject,  which  makes  newspaper  men  shy  of  dealing  with 
questions  of  which  they  know  their  own  profound  ignorance,  may 
be  put  down  as  either  effect  or  cause.  Another  reason  is  to  be 
found  in  the  fact  that  politics  with  us  are  more  generally  interest- 
ing than  with  you.  You  have  more  than  forty  legislative  assem- 
blies, and  they  all  do  the  bulk  of  their  business  in  committee  rooms. 
We  have  but  one  Parliament ;  it  does  the  bulk  of  its  talking  in 
public,  and  the  whole  nation  listens.  Then  the  political  subjects 
of  discussion  take  a  wider  range;  the  army,  the  navy,  foreign 
policy,  are  all  with  us  subjects  of  the  utmost  importance.  It  is 
these  professions  accordingly,  the  army,  the  navy,  diplomacy  and 
political  life,  which  absorb  the  bulk  of  our  ablest  men — at  least  of 
those  who  can  afford  to  choose  their  own  careers.  Our  conspicu- 
ous men  are,  first  and  foremost,  politicians,  then  soldiers  and  sail- 
ors, lawyers  and  diploniatists,  leading  divines,  litterateurs^  or 
actors — anything  rather  than  the  heads  of  the  railway  service. 
Probably  there  are  few  Americans  who  could  not  give  the  name  of 
the  president  of  the  Pennsylvania  Railroad  or  of  the  New  York  Cen- 
tral ;  it  is  questionable  whether  one  Englishman  in  fifty  could  say 
who  is  the  chairman  of  the  Northwestern  or  the  Great  Western. 

Then  again,  our  railway  politics  are  much  less  exciting  than 
yours,  because  they  are  so  much  more  stable.  The  London  and 
Northwestern  ranked  as  the  premier  English  company  twenty 
years  before  America  had  ever  heard  of  either  Scott  or  Vander- 
bilt.       It  remains  the  premier  company  to-day,  and  is  likely  to 

Reprinted  by  permission  from  The  Independent  of  October  6,  1892, 


140 


ENGLISH  AND  AMERICAN  RAILWAYS. 


remain  so  till  the  New  Zealander  comes  to  England  to  sketch  the 
ruins  of  St.  Paul's.  Within  a  dozen  years  the  New  York  Central 
dividend  has  fallen  from  8  per  cent,  to  nothing,  and  recovered 
again  almost  to  its  former  point;  but  within  the  memory  of  the 
present  generation  the  Northwestern  dividend  has  only  varied  be- 
tween the  narrow  limits  of  6  and  7  ^  per  cent.  As  for  the  prefer- 
ence stocks  and  debentures  of  our  leading  English  railways  they 
are  probably  among  the  safest  investments  in  the  world.  A  man 
can  buy  them  to-day  and  put  away  his  certificates  in  a  safe,  with 
entire  confidence  that  they  will  be  worth  to  his  grandchild  fifty 
years  hence  all  that  they  are  worth  to  him  to-day.  Our  leading 
companies  raise  millions  of  fresh  capital  every  year ;  they  might 
raise  ten  fold  as  much  without  reducing  the  price  at  which  they 
can  place  their  securities.  That  price  is  a  fraction  under  3  per 
cent  for  debentures,  a  fraction  over  for  preferences,  and  some- 
where between  3^  and  4  per  cent  for  ordinary  stocks.  The  nor- 
mal dividend,  for  example,  of  the  Northwestern  may  be  taken  as 
just  about  7  per  cent,  and  the  normal  price  somewhere  between 
170  and  180. 

The  railways  of  America  do  not  owe  much  to  Government  aid ; 
but  the  railways  of  England  and  Scotland  owe  to  it  absolutely 
nothing.  In  Ireland  the  state  has  given  or  lent  a  few  millions  to 
railway  companies,  with  results  which  cannot  be  claimed  as  over 
satisfactory.  But,  if  our  government  has  not  helped,  at  least  it 
has  controlled  from  the  very  outset.  No  railway  can  be  made 
without  an  act  of  Parliament ;  for  it  is  with  us  a  fundamental 
principle  that  no  authority  short  of  Parliament  itself  can  condemn 
private  property  for  public  uses.  Before  sanctioning  such  an  ex- 
propriation Parliament  inquires  with  great  minuteness  into  the 
leading  features  of  the  proposed  undertaking.  Plans  of  every 
yard  of  land  to  be  taken,  with  the  name  of  every  owner  and  occu- 
pier upon  it,  a  list  of  the  promoters,  with  the  exact  amount  of 
capital  required,  and  the  form  in  which  it  is  to  be  raised,  are  laid 
before  Parliament  and  receive  its  formal  sanction.  To  an  outside 
inquirer  it  might  seem  strange  to  learn  that,  tho'  minute  details 
have  to  be  given  of  the  span  of  a  bridge  or  the  depth  of  a  cutting, 
stations  are  completely  ignored,  and  the  railway  company  is  left 
free  either  to  omit  them  altogether  or  to  construct  them  where 
and  in  what  form  it  pleases.  The  explanatiom,  as  of  most  English 
anomalies,  is  an  historical  one ;  being  found  in  the  fact  that  the 
Parliamentary  regulations  were  laid  down  in  days  when  the  origi- 
nal theory  that  a  railway  was  a  road  on  to  which  each  passenger 
or  each  carrier  would  drive  out  of  his  own  private  yard  at  what- 
ever point  seemed  good  to  him,  had  not  been  proved  to  be  practi- 
cally unworkable.  One  further  function  of  Parliament  in  connec- 
tion with  new  railway  undertakings  must  not  be  forgotten,  and 
that  is  the  fixing  of  a  maximum  scale  of  rates  and  fares.  Hitherto 
this  scale  has  been  copied,  in  the  main  unchanged,  from  acts  passed 


ENGLISH  AND  AMERICAN  RAILWAYS.  141 

possibly  half  a  century  old,  and  consequently  has  been  entirely  ^ut 
of  touch  with  the  facts  of  modern  commercial  life.  But  the  maxi- 
mum scales  of  all  the  existing  railways  have  within  the  last  two 
years  undergone  a  thorough  revision  by  Parliament,  and  hence- 
forward, both  for  old  lines  and  for  newly  projected  ones,  the  max- 
imum will  act  as  a  real  limitation  on  any  attempt  to  impose  exces- 
sive rates. 

In  addition  to  the  initial  restraints  imposed  by  Parliament,  there 
is  also  the  control  of  a  special  department  of  the  executive  govern- 
ment, the  Board  of  Trade.  A  long  series  of  statutes,  the  earliest 
of  which  is  the  railway  regulation  act  of  1840,  has  conferred  upon 
the  Board  of  Trade  a  large  number  of  disconnected  but  important 
powers.  No  line  can  be  opened  for  public  traffic  till  a  Board  of 
Trade  inspector  has  certified  that  its  viaducts  and  bridges,  the 
masonry  of  its  tunnels  and  the  ballasting  of  its  permanent  way, 
the  construction  of  its  stations  with  their  elaborate  machinery  of 
interlocking  and  block  signalling,  the  pattern  of  its  engines  and 
rolling  stock,  all  have  reached  what  might  be  called  an  almost 
ideal  standard  of  safety.  Then  again,  each  year  the  Board  of 
Trade  must  be  furnished  with  statistics,  almost  as  exhaustive,  tho' 
drawn  up  in  a  form  far  less  practically  useful  than  those  which  are 
called  for  by  your  Interstate  Commerce  Commission,  giving  par- 
ticulars of  capital  and  dividend,  of  operating  expenses  and  traffic 
receipts,  of  mileage  maintained  and  train-mile  earnings.  Returns 
are  also  called  for  of  the  working  of  safety  appliances,  such  as 
block  signals  and  continuous  brakes.  Every  accident  involving 
injury,  however  trifling,  either  to  passenger  or  employe,  must  be 
reported  forthwith,  and  in  serious  cases  an  investigation  is  imme- 
diately conducted  on  the  spot  by  a  Board  of  Trade  official.  Up  to 
the  year  1889,  the  Board  of  Trade  had  no  power  to  order — it  could 
and  did  recommend,  and  public  opinion  usually  enforced  its  recom- 
mendations— the  introduction  of  new  safety  appliances  on  lines 
whose  opening  it  had  already  sanctioned.  In  that  year  public 
opinion  was  excited  by  an  accident  in  which  eighty  persons  lost 
their  lives,  and  the  Board  of  Trade  was  hastily  armed  with  com- 
pulsory powers.  Like  all  public  departments,  in  this  country  at 
least,  it  has  executed  these  powers  not  with  discretion  applied  to 
each  individual  case  but  by  general  orders,  and  has,  broadly  speak- 
ing, prescribed  for  lines  in  remote  rural  districts  with  four  or  six 
trains  a  day  the  same  standard  of  working  that  is  in  force,  and 
rightly  in  force,  on  the  main  through  routes  of  the  country.  If  an 
American  reader  will  imagine  the  accident  in  the  tunnel  outside 
the  Grand  Central  Station  in  New  York  last  year  made  a  pretext 
for  legislation  compelling  the  Missouri  Pacific  to  adopt  over  its 
entire  system  the  latest  devices  of  the  Hall  or  the  Union  Switch 
and  Signal  Companies,  he  will  have  a  notion  of  what  a  govern- 
ment department  is  doing  for  us  in  England  at  the  present  moment. 
As  far  as  can  be  seen,  new  railways  in  poor  districts  will  only  be 
constructed  in  future  by  millionaire  philanthropists. 


142  ENGLISH  AND  AMERICAN  RAILWAYS. 

ki  addition  to  Parliament  and  the  Board  of  Trade,  we  have  also 
the  control  of  the  courts  of  justice.  Your  Interstate  Commerce 
Commission  was  largely  modeled  on  our  railway  commission, 
which  has  existed,  tho'  with  some  change  of  form,  since  1873 ;  and 
the  undue  preference  clause  of  your  act  to  regulate  commerce  is 
copied  almost  verbatim  from  an  English  act  passed  as  long  ago  as 
1854.  It  is,  of  course,  impossible  to  summarize  the  decisions  which 
are  collected  in  the  fourteen  volumes  of  English  Railway  Law 
Reports ;  but  two  points  may  just  be  glanced  at.  Personal  dis- 
criminations have  been  so  sternly  dealt  with,  that,  tho'  they 
never  were  of  much  account  here,  seldom  apparently  amounting 
to  more  than  2  or  3  per  cent  of  the  total  rate,  of  late  years  they 
have — so  at  least  it  is  believed — absolutely  and  entirely  disap- 
peared. In  dealing  with  alleged  undue  preferences  as  between 
competing  trades  and  competing  localities,  the  tendency  of  our 
courts  has  always  been  to  have  regard  to  the  interests  of  the  indi- 
viduals before  them  rather  than  of  the  public  at  large  for  whom 
no  counsel  appeared.  For  if  a  rate  has  been  decided  in  any  case 
to  create  an  undue  preference  as  between  two  competing  inter- 
ests, our  English  companies  have  always  been  careful  to  redress 
the  inequality  not  by  leveling  down  but  by  leveling  up,  and  so  the 
average  of  charge  to  the  public  has  been  increased.  It  should  be 
added,  however,  that  quite  recently  the  broader  economic  side  of 
these  questions  has  not  been  without  weight  in  the  decisions  of 
the  courts.  Within  the  last  few  weeks,  for  instance,  the  endeavor 
of  the  Corn  Trade  Association,  of  Liverpool,  to  crush  the  com- 
petition of  the  Severn  ports  in  the  markets  of  the  Birmingham 
district,  has  been  successfully  and  apparently  finally  repulsed. 

But  Parliament,  the  Board  of  Trade,  and  the  law  courts,  all  put 
together,  have  not  at  the  present  moment  as  great  a  share  in  the 
control  of  English  railways  as  has  public  opinion.  It  has  been 
profoundly  remarked  that,  in  a  country  whose  government  is  or- 
ganized on  a  democratic  basis,  nothing  does  its  work  as  well  in 
practice  as  an  institution  which  is  entirely  indefensible  in  theory. 
For  it  is  only  on  condition  of  the  practical  excellence  of  its  work, 
and  so  long  as  that  excellence  continues,  that  such  an  institution 
is  suffered  to  survive.  Now  railways  as  private  undertakings 
may  not  be  actually  indefensible  in  theory,  but  unquestionably 
they  are  opposed  to  the  absorbing  and  centralizing  tendencies  of 
the  modern  state.  This  may  be  the  reason  why  our  English  com- 
panies have  done  so  much  of  late  in  the  direction  of  disarming 
opposition.  We  hear  a  great  deal,  for  example,  of  state  pensions 
for  the  aged ;  but  while  the  politicians  and  the  philanthropists  have 
been  talking,  more  than  one  of  our  great  companies  has  practi- 
cally organized  an  adequate  superannuation  for  every  man  in  its 
employ.  Again  the  state  has  imposed  on  lines  having  termini  in 
London  an  obligation  to  run  certain  trains  for  workmen  before 
eight  in  the  morning  or  after  six  in  the  evening  at  fares  averaging 


ENGLISH  AND  AMERICAN  RAILWAYS.  143 

perhaps  something  like  half  a  cent  per  mile.  The  obligatory  mile- 
age amounts  to  forty-seven  miles  per  diem;  but  in  1883  the  dis- 
tance actually  being  run  at  these  fares  was  763  miles,  while  in 
1890  it  had  increased  to  no  less  than  1,807  miles.  Again,  under 
the  pressure  of  public  opinion,  an  immense  deal  has  been  done  to 
diminish  the  risks  of  railway  employment.  Very  large  sums  of 
money  have  been  spent  with  this  object,  in,  for  instance,  widening 
tunnels  and  bridges  to  afford  safe  room  for  trackmen,  and  install- 
ing electric  light  in  switching  yards.  It  may  be  said  that  the 
published  returns  show  but  scant  results  of  this  solicitude;  to 
which  the  answer  is  obvious  that,  if  the  death  rate  has  been  even 
kept  stationary — and  in  truth  matters  are  better  than  this — in  view 
of  the  greater  density  of  traffic  and  the  constantly  higher  pressure 
at  which  the  work  is  done,  this  alone  would  imply  very  consider- 
able improvement.  In  nothing  has  the  pressure  of  public  opinion 
produced  a  greater  effect  than  in  relation  to  the  hours  of  railway 
labor.  There  are  still  too  many  cases  of  overwork  and  indefensi- 
bly long  hours,  especially  on  small  and  semi-bankrupt  lines ;  but 
the  evil  is  nothing  in  comparison  to  what  it  was  a  few  years  back 
and,  in  fact,  always  had  been  since  the  beginning  of  railways.  Of 
overwork  of  engine  men  and  brakemen,  such  as  is  recorded  in  the 
latest  returns  of  the  United  States  Labor  Bureau,  where  men,  if 
I  mistake  not,  are  reported  as  on  duty  frequently  for  more  than 
twenty-four  hours  on  end,  it  would  be  impossible,  I  am  persuaded, 
to  find  any  instances  in  this  country.  For  all  that,  now  that  the 
sore  is  practically  healed,  it  is  more  than  likely  that  our  new  Par- 
liament will  apply  a  carefully  concocted  legislative  plaster  to  it. 
To  pass  to  another  subject.  How  do  our  railway  companies 
treat  their  customers?  And  first,  of  passengers.  Passengers 
traffic  may  be  judged  from  three  points  of  view — speed,  accom- 
modation, fares.  Let  us  say  a  word  about  each.  In  speed,  an 
Englishman  must  reluctantly  acknowledge  that  the  United  States 
holds  the  record  with  the  Empire  State  Express.  What  is  more, 
you  seem  likely  to  continue  to  hold  it ;  for  your  speeds  are  rapidly 
rising,  while  our  management  is  growing  faint-hearted — it  might 
not  be  patriotic  to  add  feeble-minded — and  is  talking  not  of  im- 
provements and  accelerations  but  of  reductions  in  speed  and  re- 
trenchments of  service.  But  it  is  still  possible  to  hope  that  this 
retrograde  movement  will  end  in  talk.  Meanwhile,  we  can  still 
record  with  satisfaction  that  of  fast  and  very  fast  trains — of  all  but 
the  very  fastest — we  have  many  more  than  has  the  United  States. 
Four  years  back  Messrs.  Farrer  and  Foxwell  drew  up  a  list  of  672 
trains  running  a  total  distance  of  63,000  miles  per  diem  in  Great 
Britain  at  a  speed  of  not  less  than  forty  miles  an  hour  including 
stops.  It  is  quite  certain  that  no  such  figures  could  be  produced 
in  America.  As  to  accommodation,  there  has  been  a  good  deal  of 
loose  talk  by  partisans  on  both  sides.  An  impartial  summary 
would,   perhaps,   run   something   like    this.     English  third-class 


144  ENGLISH  AND  AMERICAN  RAILWAYS. 

carriages  on  the  best  lines  are  more  comfortable  for  a  long  journey 
than  American  ordinary  cars.  The  absence  of  lavatory  accom- 
modation is  an  evil  which  on  long-distance  express  trains  is  rapidly 
righting  itself,  partly  by  the  extravagant  system  of  attaching  a 
lavatory  to  each  compartment,  partly  by  building  what  are  known 
as  corridor  carriages  with  lavatories  at  either  end.  In  fact,  signs 
are  not  wanting  that  for  long-distance  express  service  corridor 
carriages  will  develop  into  corridor  trains.  American  drawing- 
room  cars  are  far  from  popular  here.  England  is  an  island,  and 
the  average  Englishman  takes  after  his  country,  and  likes  to  be  as 
far  as  possible  insulated  from  his  neighbors.  He  is  told  his  com- 
partment is  "lonesome  and  stuffy."  He  replies  that  solitude  is 
what  he  wants,  and  that  he  obviates  the  stuffiness  by  letting  down 
the  window  and  sitting  in  a  draft.  It  may  be  bad  taste ;  but  there 
is  the  fact.  Dining-cars,  however,  are  very  popular,  and  their  use 
is  steadily  extending.  Sleeping-cars,  also,  have  taken  firm  hold ; 
once  more,  however,  not  open  from  end  to  end  like  your  Pullman, 
but  divided  into  sections,  in  each  of  which  there  is  often  only  one 
passenger,  and  very  rarely  indeed  more  than  two.  As  for  fares, 
your  statistics  set  down  the  average  rate  paid  as  something  over 
two  cents.  The  best  estimate  that  can  be  made  for  this  country 
would  put  the  average  at  about  1.80  cents.  As  I  have  said,  I  be- 
lieve our  third-class  carriages — comparing  like  with  like,  the 
Pennsylvania  with  the  Northwestern  or  the  New  York  and  New 
Haven  with  the  Lancashire  and  Yorkshire — are  fully  as  comfort- 
able as  the  ordinary  American  cars.  It  is,  therefore,  quite  fair 
to  compare  our  average  charge  for  what  we  call  third-class  accom- 
modation with  your  average  charge,  tho'  it  be  for  what  you  call 
first-class.  It  should,  in  fairness,  be  added,  that  our  extra  charge 
for  the  use  of  first-class  carriages,  which  may  be  said  to  corres- 
pond to  your  drawing-room  cars,  is  very  much  higher  than  with 
you.  Our  excess  rates  from  third  to  first,  say  between  Philadel- 
phia and  New  York,  would  be  nearly  two  dollars  in  many  instances, 
as  against  half  a  dollar  actually  charged  on  the  "Congressional 
Limited."  But  then  with  us  it  is  practically  always  possible  to 
travel  third-class  on  every  train — so  that  our  fare  from  Philadel- 
phia to  New  York  would  be  $1.80  instead  of  $2.50 — and  for  long 
distances,  at  least,  nineteen  people  out  of  twenty  do  in  fact  so 
travel.  Those  who  pay  the  difference  can  mostly  well  afford  to 
do  so. 

It  is  difficult  enough  to  compare  the  passenger  traffic  of  the  two 
countries.  To  compare  the  goods  traffic  is  practically  impossible. 
Half  a  dozen  years  back  Professor  Hadley  wrote  as  follows: 

"Any  attempt  at  comparison  of  freight  charges  would  be  long,  technical 
and  unsatisfactory.  On  high-class  freight  it  is  altogether  impossible,  because 
the  English  rates  for  such  goods  include  collection  and  delivery.  No  one  can 
tell  how  much  we  should  allow  for  cartage,  or  whether  we  should  take  Ameri- 
can freight  rates  or  express  rates  as  our  standard  of  comparison.  An  extremely 
rough  estimate,  not  making  allowance  for  any  of  the  disadvantages  to  which 


ENGLISH  AND  AMERICAN  RAILWAYS.  j^c 

English  railroads  are  subject,  would  indicate  that  their  charges  per  ton  mile 
on  all  traffic  average  from  50  to  75  per  cent  higher  than  ours." 

Where  Professor  Hadley  confesses  himself  beaten,  it  would  be 
rash  for  any  other  man  to  look  for  success.  But  this  much  per- 
haps may  be  said.  On  paper  your  average  rate  is  less  than  one 
cent ;  our  average  is  probably — there  are  no  precise  figures  in  ex- 
istence— about  2j^  cents,  but  your  average  haul  being  127  miles, 
and  ours  certainly  not  more  than  a  fifth  of  this  distance,  evidently 
our  terminal  expenses  work  out  to  more  than  five  times  as  much 
per  mile  as  yours.  Then  a  large  proportion  of  our  rates  include 
cartage  and  delivery ;  and  cartage  even  of  rough  goods,  in  New 
York,  costs  I  find,  anywhere  from  one  to  two  dollars  per  ton — a 
pretty  heavy  addition  to  the  railway  rates.  Further,  and  the  point 
is  of  primary  importance,  our  goods  traffic  is  essentially  retail, 
worked  in  small  lots  at  high  speed  and  very  frequent  intervals, 
yours  is  essentially  wholesale,  worked  in  full  train  loads,  at  such 
speeds  and  at  such  intervals  as  the  railway  companies  find  most 
economical  to  themselves.  If  I  may  use  again  a  metaphor  which 
I  have  used  before,  a  man  pays  one  dollar  for  his  dinner  on  con- 
dition of  taking  his  meal  with  the  rest  and  eating  what  his  hotel 
provides  at  the  ordinary  hours ;  but  it  will  cost  him  ten  dollars  if 
he  goes  to  Delmonico  and  orders  each  dish  to  be  cooked  and  served 
separately  at  his  own  time. 

A  point  of  more  general  interest  is,  I  think,  the  question  of  rail- 
way competition.  There  are  those  who  say  that  competition  has 
practically  ceased  in  England,  because  competing  companies  always 
enter  identical  rates  in  their  rate  books,  and,  what  is  more,  exact 
those  rates  without  discount  or  rebate.  Certain  it  is  that  rate  cut- 
ting has  been  practically  put  an  end  to  by  an  imderstanding  be- 
tween the  companies,  which,  like  international  law,  has  no  sanc- 
tion behind  it  except  the  agreement  of  the  high  contracting  par- 
ties. Two  years  back  there  was  a  rate  war,  the  first  for  twenty 
years ;  but  it  was  confined  to  two  small  coal  lines  in  Wales  and  it 
never  brought  the  rate  below  something  like  .  9  of  a  cent  per  mile, 
which  to  American  readers  would  probably  seem  a  stiffish  rate  for 
coal  even  in  the  most  peaceful  times.  Over  a  considerable  part 
of  England  the  traffic  is  pooled;  in  some  cases,  as  for  instance  at 
Hastings  and  Tunbridge  Wells  between  the  Southeastern  and  the 
Brighton  Companies,  or  at  Ramsgate  and  Dover  between  the 
Southeastern  and  the  London,  Chatham  and  Dover,  by  special 
statutory  enactment.  There  are,  however,  numerous  other  pools, 
as,  for  instance,  between  the  Brighton  and  Southwestern  Com- 
panies for  traffic  to  Portsmouth  and  the  Isle  of  Wight ;  between 
the  Great  Western  and  the  Northwestern  for  traffic  to  Wales  and 
Ireland;  between  the  Northwestern  and  the  Lancashire  and  York- 
shire for  traffic  in  the  Liverpool  and  Manchester  district,  which 
are  merely  matters  of  private  agreement,  entirely  unknown  to  the 


146  ENGLISH  AND  AMERICAN  RAILWAYS. 

public  at  large.  Some  of  these  pools  are  subject  to  revision  every 
ten  years.  Others  are  believed  to  be  agreements  in  perpetuity; 
but  in  this  latter  case  they  are  perhaps  more  of  the  nature  of  par- 
tititions  of  territory  than  traffic  pools.  There  is  only  one  agree- 
ment with  which  I  am  acquainted,  that,  namely,  between  the 
Southeastern  and  the  Brighton  Company  in  relation  to  the  East- 
bourne traffic,  under  which  one  company  pays  another  a  percent- 
age of  its  receipts  as  an  inducement  to  that  other  to  refrain  alto- 
gether from  competition.  The  amount  paid  under  this  agreement 
is  at  present  about  ^24,000  per  annum.  In  this  case,  except  so 
far  as  potential  competition  has  a  tendency  to  prevent  the  existing 
service  (which  is  by  the  Brighton  Company)  falling  below  a  cer- 
tain minimum  standard  of  excellence,  the  public  appears  to  gain 
nothing,  as  the  alternative  service  is  thereby  excluded.  Such  an 
arrangement  is  accordingly  by  no  means  popular,  and  as  little  is 
said  about  it  by  the  companies  concerned  as  possible. 

But  to  pools  properly  so-called  there  does  not  seem  to  be  any 
popular  objection.  Indeed,  within  the  last  year  the  two  great 
Scotch  companies,  the  North  British  and  the  Caledonian,  have 
agreed  to  a  twenty-five  years'  pool  of  their  traffic ;  and  tho'  there 
was  a  good  deal  of  opposition  in  Glasgow  when  it  was  first  an- 
nounced, within  the  last  few  weeks  the  Glasgow  traders  have  con- 
fessed that  they  were  mistaken  and  that  none  of  the  ills  which 
they  have  anticipated  have  arisen.  It  may  be,  of  course,  that 
they  congratulate  themselves  prematurely.  But  the  fact  is,  the 
public  see  what  looks  like  competition  going  on  all  around  them. 
As  traders  they  see  the  canvassers  of  the  different  companies 
coming  to  them,  hat  in  hand,  and  begging  for  traffic,  promising  a 
later  departure,  more  careful  handling,  and  more  prompt  delivery ; 
it  may  be,  more  generous  settlement  of  claims.  As  passengers, 
they  see  the  companies  vying  with  one  another  in  improvements 
in  accommodation,  in  frequency  of  service,  or  in  increased  speed, 
as  well  as  in  a  score  of  details  which  make  up  the  comfort  of  pas- 
senger travel.  Accordingly,  when  the  theorist  comes  along  with 
his  assurance  that  competition  is  extinct,  and  that  pools  have  done 
the  mischief,  they  are  apt  to  shrug  their  shoulders  and  take  not 
much  notice. 

As  for  the  financial  success  of  English  railways,  this  alone  need 
be  said:  We  have  got  in  the  British  Isles  20,000  miles  of  line, 
which  have  cost  us  ^900,000,000,  or,  say  ^45,000  per  mile.  For 
something  more  than  twice  the  money,  the  United  States  has  got 
more  than  eight  times  the  length  of  track.  Of  course,  to  com- 
pare an  average  mile  of  your  line  with  an  average  mile  of  ours 
would  be  almost  as  absurd  as  to  reckon  a  mile  of  corduroy  road  in  a 
Maine  forest  as  the  equivalent  of  a  mile  of  Broadway.  But  for 
all  that,  it  is  evident  that  to  pay  4  per  cent  interest  on  ^45,000 — 
and  4  per  cent  is  what  our  roads  do  pay  on  an  average  of  the  total 
capital — a  mile  of  line  in  this  country  had  need,  even  at  our  high 


ENGLISH  AND  AMERICAN  RAILWAYS. 


147 


rate,  to  carry  a  good  deal  of  traffic.  And  so,  in  fact,  it  does; 
for  while  your  lines  only  earn  some  $6,000  per  mile,  ours  earn, 
well  over  $20,000.  Of  this  sum  moreover,  operating  expenses  only 
absorb  some  54  per  cent  as  against  over  66  per  cent  with  you. 
Within  the  last  year  or  two,  however,  owing  to  various  causes,  of 
which  enhanced  cost  of  material.  Board  of  Trade  safety  require- 
ments, and  higher  wages  and  shorter  hours  of  employes  are  the 
the  chief,  working  expenses  have  increased  out  of  all  proportion 
to  the  increase  of  receipts.  So  far,  our  railway  companies  have 
not  seen  their  way  to  any  corresponding  economies  in  methods  of 
working,  such  as  those  which  have  so  justly  made  American  rail- 
way management  a  pattern  for  the  civilized  world.  An  English- 
man, however,  with  faith  in  the  future  of  his  country  cannot  but 
believe  that,  once  English  railway  officials  have  realized  that  the 
increase  in  expenses  has  come  to  stay,  they  will  rise  to  the  occa- 
sion, and  consider  the  possibility  of  reforms  other  than  the  some- 
what elementary  ones  of  increasing  charges  and  simultaneously 
retrenching  facilities.  Otherwise  the  outlook  both  for  the  English 
public  and  for  English  shareholders  is  but  a  poor  one. 
London,  England. 


HIGH  SPEED  RAILROAD  TRAVEL. 

By  Mr.  Theodore  Voorhees, 

General  Superintendent,  New  York  Central  and  Hudson  River  Railroad. 

Time  is  money.  The  man  of  today  learns  this  lesson  early  and 
keeps  it  ever  before  him.  He  gets  the  utmost  out  of  every  hour. 
This  is  carried  to  such  an  extent  that  it  has  become  the  ruling 
characteristic  of  our  people.  We  must  have  go;  energy,  push; 
we  must  live  at  express  speed,  under  constant  high  pressure,  or 
we  are  not  satisfied. 

In  no  way  is  this  feeling  more  plainly  shown  than  in  the  steady 
demand  for  high  speed  in  railroad  travel.  Trains  that  a  few  years 
ago  were  regarded  as.  models  of  fast  service  are  now  voted  slow, 
and  are  shunned  by  those  who  have  to  take  long  journeys.  The 
distances  to  be  overcome  in  this  country  are  very  great.  Our 
business  men  think  nothing  of  them.  Time  is  getting  to  be  more 
and  more  valuable.  The  telegraph  and  more  recently  the  tele- 
phone have  brought  the  most  distant  points  almost  within  speak- 
ing distance  one  with  another;  so  that  there  is  a  constant  effort 
being  made  to  reduce  the  time  occupied  in  transit  from  city  to 
city. 

Only  about  ten  years  ago  the  usual  time  occupied  in  a  journey 
between  New  York  and  Chicago  was  thirty-six  hours.  The  trains 
stopped  at  regular  intervals  for  meals,  and  the  public  was  reason- 
ably satisfied  with  the  service.  Soon  some  roads  began  running 
a  train  in  either  direction  that  only  obliged  the  traveler  to  be  one 
night  in  a  sleeping  car.  Next  was  introduced  the  dining-car  ser- 
vice; and  now  we  have  trains  running  regularly  over  the  distance 
inside  of  twenty-five  hours,  or  twenty-four  hours  apparent  time. 

Still  the  public  is  impatient  for  faster  service,  and  projects  are 
now  on  foot  looking  forward  to  a  further  considerable  reduction 
in  this  time.  It  is  confidently  expected  that  during  the  season  of 
the  World's  Fair,  in  1893,  it  will  be  possible  for  a  traveler  to  leave 
New  York  in  the  afternoon,  after  the  day's  business  is  completed, 
and  be  at  Chicago  the  following  morning  in  season  for  the  opening 
of  business  hours. 

Nor  is  this  demand  for  high  speed  confined  to  long-distance 

Reprinted  by  permission  from  The  Independent  of  October  6,  1892. 


HIGH  SPEED  RAILROAD  TRAVEL.  149 

travel.  There  is  a  constant  pressure  brought  to  bear  on  the  rail- 
road manager  to  increase  the  speed  of  trains,  and  so  decrease  the 
time  between  suburban  points  and  different  cities.  The  commuter 
measures  his  distance  not  by  miles  but  by  minutes ;  and  if  an 
established  train,  for  any  reason,  has  its  time  lengthened  three  or 
four  minutes,  there  is  an  immediate  protest  and  a  demand  that 
the  time  be  restored  or  cut  short. 

There  is  constantly  put  before  the  railroad  manager  of  America 
the  example  of  what  is  being  accomplished  in  England;  and  it 
must  be  confessed  that  until  very  recently  the  comparison  has 
been  considerably  to  the  disadvantage  of  the  American  railroad. 
There  are  several  reasons  that  can  be  advanced  to  account  for 
this.  The  ideal  railroad  would  be  perfectly  straight  and  level; 
with  a  roadbed  and  track  heavy,  substantial  and  thoroughly 
drained ;  with  no  grade  crossings  or  openings  to  invite  trespassers; 
with  bridges  whose  floors  should  be  as  solid  as  the  roadbed  itself ; 
and  with  stations  so  planned  that  no  passenger  could  ever  set  foot 
upon  the  track.  English  railroads  from  the  beginning  have  had 
this  ideal  in  view,  and  the  construction  has  been  of  a  far  more 
permanent  and  substantial  character  than  has  been  possible  in  the 
case  of  railroads  built  in  this  country.  The  English  law  has  been 
most  severe  in  its  requirements  as  to  construction  before  any  road 
has  been  permitted  to  be  operated.  American  railroads,  on  the 
other  hand,  have  been  too  often  merely  thrown  upon  the  ground, 
so  that  some  sort  of  operation  might  be  made  possible  with  the 
least  outlay  of  capital,  and  the  actual  work  of  construction  left  to 
the  future  as  the  earnings  of  the  line  might  provide  the  necessary 
funds.  The  result  is,  that  with  comparatively  few  exceptions, 
our  railroads  today  compare  unfavorably  with  those  of  England  in 
respect  to  solidity  of  roadbed.  In  England,  also,  there  is  almost 
an  entire  freedom  from  grade  crossings,  and  the  roadbeds  are  so 
thoroughly  fenced  and  policed  that  there  is  little  or  no  danger  of 
accidents  occurring  by  reason  of  trespassers  on  the  track.  It  is 
only  within  a  few  years  past  that  there  has  been  any  attempt  at 
all  in  this  country  to  produce  a  similar  condition.  Grade  crossings 
are  the  rule,  and  instead  of  being  abolished,  are  being  constantly 
added  to  in  all  parts  of  the  country.  Public  opinion  has  not  yet 
reached  that  point  with  us  that  the  abolition  of  grade  crossings  is 
looked  upon  with  favor  by  those  whose  personal  interests  may  be 
affected.  So  far  from  our  railroads  being  thoroughly  fenced  or 
policed,  on  the  contrary  they  are  in  many  cases  openly  used  as  a 
highway  between  adjacent  places  where  the  public  highway  may 
not  be  quite  so  convenient  in  point  of  distance.  Public  authorities 
pay  little  or  no  attention  to  this,  nor  will  they  assist  in  any  effort 
that  may  be  made  on  the  part  of  railroad  managers  to  put  a  stop 
to  the  evil.  The  result  is,  that  all  manner  of  persons  are  con- 
stantly walking  on  railroad  tracks,  and  casualties  are  frequent.  In 
some  few  cases  efforts  have  been  made  in  this  country  to  abso- 


150  HIGH  SPEED  RAILROAD  TRAVEL. 

lutely  prevent  persons  from  walking  on  or  across  railroad  tracks. 
One  would  suppose  that  this  effort  on  the  part  of  the  railroad  com- 
panies would  meet  with  the  approval,  at  least,  of  those  persons 
whose  safety  was  the  object.  On  the  contrary,  every  effort  of 
this  nature  on  the  part  of  railroad  managers  is  met  with  strong 
opposition  and  public  protest  from  those  persons  for  whose  safety 
the  fences,  etc.,  are  designed.  Underground  passages  or  over- 
head bridges,  constructed  to  enable  the  public  to  avoid  the  neces- 
sity of  walking  on  the  track,  are  absolutely  unused,  and  passen- 
gers insist  on  risking  their  lives  to  save  half  a  minute  rather  than 
step  a  few  feet  above  or  below  the  rails  and  walk  in  safety. 

An  examination  of  the  schedules  published  by  the  railroads  of 
England  and  Scotland  shows  a  large  number  of  daily  trains  whose 
speed  exceeds  forty  miles  an  hour,  and  very  many  where  a  speed 
of  over  fifty  miles  per  hour  is  attained.  Between  Liverpool  and 
Manchester,  on  one  road  there  are  seventeen  express  trains  in 
each  direction  running  at  a  rate  faster  than  forty  miles  per  hour, 
while  several  cover  the  distance,  thirty-four  miles,  in  forty 
minutes.  Between  London  and  Grantham  on  the  Great  Northern 
Railway  there  are  upward  of  twenty  express  trains  daily  in  each 
direction.  The  fastest  use  but  one  hundred  and  seventeen 
minutes  for  the  one  hundred  and  five  miles.  Between  London 
and  Leicester,  ninety-nine  miles,  via  the  Midland,  the  express 
service  gives  thirteen  trains  each  way  daily,  the  fastest  of  which 
takes  but  one  hour  and  fifty-five  minutes  for  the  trip,  while  on  the 
same  line  the  express  train  time  between  London  and  Liverpool, 
two  hundred  and  twenty  miles  is  five  hours.  Between  Edinburgh 
and  Carlisle,  on  the  Caledonian  Railway,  a  fraction  over  one  hund- 
red miles  is  traversed  daily  in  exactly  two  hours  by  the  fastest 
train,  while  several  other  trains  make  the  time  at  better  than  forty 
miles  per  hour.  This  list  might  be  lengthened  indefinitely,  but 
enough  has  been  given  to  show  that  the  express  service  in  all 
parts  of  England  and  Scotland  at  a  rate  of  forty  miles  per  hour  is 
common,  while  trains  at  the  rate  of  fifty  miles  per  hour,  or  even 
more,  are  by  no  means  infrequent.  The  most  noticeable  thing 
about  this  train  service  to  an  American  railroad  man  is  the  ap- 
pearance of  the  locomotives  and  the  weight  of  the  trains.  The 
majority  of  express  trains  in  Great  Britain  are  drawn  by  locomo- 
tives having  but  a  single  pair  of  large  driving  wheels.  These  are 
frequently  seven  feet  in  diameter,  some  are  seven  feet  six  inches, 
and  occasionally  one  sees  an  engine  with  driving  wheels  having  a 
diameter  of  eight  feet.  These  large  wheels  cover  a  considerable 
distance  at  each  revolution  and  so  attain  excellent  results  with  com- 
paratively low  piston  speed.  But  this  is  at  the  expense  of  power ; 
so  we  are  not  surprised  to  find  that  the  trains  drawn  by  these 
engines  are  very  light,  and  carry  but  a  small  number  of  passen- 
gers. The  average  weight  of  the  trains  mentioned  above  is  one 
hundred  and  thirty-five  tons.     This  would  be  about  equivalent  to 


HIGH  SPEED  RAILROAD  TRAVEL.  151 

a  train  in  this  country  consisting  of  a  baggage  car  and  four  ordi- 
nary passenger  cars,  or  to  a  train  of  three  Pullman  sleeping  cars. 

There  are  some  places  in  this  country  where  our  service  will 
compare  favorably  with  the  best  English  practice.  Between  New 
York  and  Philadelphia,  eighty-nine  miles,  by  the  Philadelphia  and 
Reading  route,  there  are  twelve  trains  each  way  daily  that  make 
the  run  inside  of  two  hours.  One  does  the  distance  in  one  hund- 
red and  eight  minutes.  By  the  Pennsylvania  Railroad  equal  time 
is  made  between  the  same  places.  Between  Baltimore  and  Wash- 
ington, via  the  Baltimore  &  Ohio  Railroad,  there  are  sixteen 
trains  each  way  daily  that  pass  over  the  forty  miles  inside  of  an 
hour,  and  several  that  make  the  run  in  forty- five  minutes.  On 
the  Pennsylvania  Railroad,  with  slightly  greater  distance  from 
station  to  station,  there  are  an  equal  number  of  trains  making 
equally  as  good  time. 

The  time  of  all  the  express  trains  between  New  York  and  Bos- 
ton by  the  several  different  routes  has  been  until  quite  recently 
six  hours  and  thirty  minutes.  This  has  been  reduced  during  this 
past  season,  on  one  or  two  trains  in  either  direction,  to  five  hours 
and  forty  minutes.  This  is  about  forty-one  miles  per  hour  for  the 
distance.  This  is  the  regular  rate  of  speed  of  the  "Limited" 
trains  running  between  New  York  and  Chicago,  both  on  the 
Pennsylvania  Railroad  and  the  New  York  Central  &  Hudson 
River  Railroad.  In  comparing  this  service  with  that  of  the 
English  roads  mentioned  above,  the  weight  of  the  train  load  in 
this  country  should  be  kept  in  mind.  The  average  weight  of  one 
of  our  limited  trains,  exclusive  of  the  locomotive  and  tender,  is 
upward  of  two  hundred  tons ;  while  very  many  trains  weighing 
over  four  hundred  tons  are  met  with  in  this  country  whose  speed 
equals  that  given  above. 

On  the  New  York  Central  &  Hudson  River  Railroad  between 
Syracuse  and  Rochester,  eighty-one  miles,  there  are  a  number  of 
daily  trains  that  make  the  run  in  either  direction  inside  of  two 
hours,  and  one  that  covers  the  distance,  including  one  stop,  in 
eighty-seven  minutes.  This  last  is  the  Empire  State  Express, 
that  runs  from  New  York  to  Buffalo,  four  hundred  and  forty  miles 
in  eight  hours  and  forty  minutes.  Allowing  for  stops,  this  is  at 
the  rate  of  fifty-two  miles  an  hour.  Taking  into  account  the  dis- 
tance, this  is  the  fastest  regular  train  scheduled  by  any  railroad  in 
the  world.  It  weighs  one  hundred  and  thirty  tons,  makes  the 
scheduled  time  with  regularity,  and  can  take  on  an  additional  pas- 
senger car  or  Wagner  car  and  still  make  time  with  ease. 

The  tendency  of  the  present  time  in  this  country  is  undoubtedly 
toward  higher  speed  in  all  classes  of  train  service.  The  public 
demands  it  and  is  willing  to  pay  for  it.  The  railroads  must  pro- 
vide it.  .  " 

The  railroads  in  all  directions  are  working  towards  this  end. 
Very  large  expenditures  are  being  made  today  in  improving  the 


152     '  HIGH  SPEED  RAILROAD  TRAVEL. 

aligfnment  and  permanent  way  of  our  railroads.  New  and  heavier 
rails  are  being  laid,  bridges  are  being  re-enforced  and  renewed  in 
anticipation  of  heavier  locomotives,  improved  power  brakes  are 
being  introduced,  and  highly  complicated  and  expensive  sig- 
naling apparatus  is  being  built  with  a  view  to  insuring  the  safety 
of  our  trains.  In  a  word,  everything  is  being  done  to  promote  the 
safe  and  rapid  movement  of  passengers.  But  no  expenditures  of 
the  railroad  companies  alone,  no  matter  how  great,  will  result  in 
the  perfect  railroad  on  which  the  highest  speed  may  be  attained. 
The  co-operation  of  the  communities  through  which  the  railroad 
passes  and  of  the  general  public  must  be  secured  to  achieve  the 
best  possible  results. 

Existing  grade  crossings  must  be  abolished,  not  simply  guarded 
by  a  watchman  and  a  flimsy  gate,  and  the  opening  of  new  cross- 
ings in  the  future  rendered  impossible  by  law.  The  writer  re- 
cently traveled  on  a  regular  passenger  train  twenty-five  miles  in 
twenty-five  minutes.  About  midway  in  this  distance  a  town  was 
passed  through  which  there  was  one  frequently  used  grade  cross- 
ing. The  engineer  "slowed  down"  to  a  rate  of  forty  miles  an 
hour  going  over  this  crossing.  The  preceding  miles  had  been 
passed  over  in  from  fifty-three  to  fifty-seven  seconds  each.  It  took 
four  miles  before  the  train  recovered  the  speed  it  had  been  making 
prior  to  the  "  slow  down,"  and  a  full  minute  was  lost  by  reason  of 
it ;  or,  in  other  words,  at  least  one  mile  was  added  to  the  length 
of  that  trip  by  reason  of  that  grade  crossing.  The  case  of  a  pas- 
senger train  discharging  passengers  at  a  station  on  the  opposite 
side  of  the  main  track  is  still  worse.  In  this  case  an  approaching 
train  is  obliged  for  safety  to  come  to  a  full  stop.  To  a  train 
scheduled  at  high  speed  such  a  stop  means  a  delay  of  five  minutes, 
or  equivalent  to  five  miles  added  to  the  length  of  the  trip. 

Imperfect  as  our  roads  still  are  as  compared  with  the  English, 
such  is  the  skill  and  ingenuity  of  our  locomotive  builders  that  we 
are  today  able  to  equal  the  best  achievements  of  English  railroads 
in  point  of  speed.  Let  public  opinion  once  be  aroused  to  the  im- 
portance of  the  matter,  so  that  the  authorities  will  co-operate  with 
the  railroads  in  abolishing  grade  crossings  and  properly  protecting 
stations  and  platforms,  and  we  will  have  in  this  country  railroads 
whose  performances  in  respect  to  speed  and  safety  shall  be  models 
for  the  whole  world.  Then  we  will  no  longer  regard  sixty  miles 
an  hour  as  phenomenal,  for  one  hundred  miles  in  an  hour  will  be 
no  more  unusual  than  sixty  miles  are  now.  Then  the  New  Yorker 
will  leave  home  after  breakfast,  go  to  Boston  or  Washington, 
transact  his  business,  and  return  home  in  time  to  dine  with  the 
same  ease  and  comfort  as  the  similar  trip  is  made  today  to  Albany 
and  back. 

New  York  City. 


THE  RELATIONS  BETWEEN  CANADIAN  AND 
AMERICAN  RAILWAYS. 

By  Mr.  A .  C.  Raymond. 

Of  Detroit,  Mich. 

When  I  was  very  courteously  invited  to  read  a  paper  before  this 
convention  there  was  no  hint  given  me  of  the  special  field  I  was 
expected  to  glean,  hence  the  few  sheaves  I  may  chance  to  bring 
you  will  doubtless  be  gathered  somewhat  at  haphazard,  and  from 
the  general  surface  of  the  relations  between  American  and  Cana- 
dian railways.  The  present  discussion  of  this  subject  arises  natur- 
ally and  logically  from  the  enactment  of  the  interstate  commerce 
act,  without  which  the  present  aspect  of  the  situation  could  not 
have  existed.  The  plausible  pretext  is,  that  as  American  railways 
are  now,  at  least  prwia  facte,  regulated  in  their  operations  by 
law,  their  Canadian  competitors  for  American  traffic  should  sub- 
mit to  the  same  regulations  This  is  the  favorite  statement  of 
those  opposed  to  Canadian  lines,  and  outwardly  appears  without  a 
flaw,  but  beneath  its  fair  seeming  surface  lurk  numerous  fallacies 
which  need  to  be  pointed  out. 

A  brief  retrospect  of  the  condition  of  things  which  led  up  to  the 
enactment  of  the  Interstate  Commerce  act  may  not  here  be  out  of 
place.  No  single  factor  in  our  national  progress  during  the  last 
half  century  has  been  so  potent,  as  the  development  of  our  system 
of  transportation.  Millions  of  acres  of  our  fertile  domain  are  today 
pouring  their  vast  perennial  treasures  into  the  laps  of  our  sea- 
board cities,  from  a  distance  of  one  thousand  and  two  thousand 
miles,  with  greater  ease  and  at  a  larger  remuneration  to  the  pro- 
ducer, than  if  those  lands  had  been  situated  within  two  hundred 
miles  of  the  same  cities  less  than  a  century  ago.  Early  in  the 
fourth  decade  of  this  century  a  newspaper  in  Albany,  N.  Y.,  an- 
nounced as  the  crowning  result  of  our  transportation  system,  that 
certain  articles  of  merchandise  could  be  transported  between  that 
city  and  Cincinnati  at  the  unparalled  and  unheard  of  low  rate  of 
$2.40  per  100  lbs.  Today  our  railroads  carry  the  same  merchan- 
dise between  the  same  cities  for  one-tenth  of  that  price  per  100 

Address  delivered  before  the  Traffic  Convention  held  at  Sault  Ste.  Marie,  Mich.,  August 
28,  i88q. 


154  CANADIAN  AND  AMERICAN  RAILWAYS. 

lbs.,  and  in  one-fourth  the  time.  For  trading  purposes  with  the 
seaboard,  the  city  of  Cincinnati,  and  all  interior  sections  of  our 
country  at  an  equivalent  distance,  are  more  than  ten  times  as 
valuable  as  they  were  fifty  short  years  ago. 

That  rate  of  $2.40  per  100  pounds  between  Cincinnati  and 
Albany  was  indeed  a  marvel  of  cheapness,  when  we  recall  that 
less  than  ten  years  previously  the  famous  Cones  toga  wagon  sys- 
tem in  Pennsylvania  was  furnishing  cheap  transportation  between 
Philadelphia  and  Pittsburg  at  $2.87}^  per  100  pounds,  and  a  six 
days'  journey.  These  statements  sound  like  ancient  history  to 
the  present  generation,  and  yet  thousands  of  men  touching  elbows 
with  us  today  can  readily  recall  the  pack  saddle,  the  freight 
wagon,  and  the  stage  coach  eras.  In  those  days,  as  in  these, 
transportation  managers  deplored  competition,  denounced  inter- 
ference with  their  systems,  and  resisted  all  attempts  to  initiate 
newer,  better  and  cheaper  ones.  Projectors  of  the  early  railroads 
met  little  sympathy,  but  plenty  of  derision  from  the  advocates  of 
other  systems,  until  a  reluctant  confession  was  finally  wrung  from 
them,  that  railroads  might  within  certain  limited  areas  become  of 
some  value  in  moving  merchandise,  but  the  passenger  traffic 
would  never  depart  from  the  safety,  comfort  and  speed  of  the 
stage  coach  and  the  canal  boat.  The  possibilities  in  the  develop- 
ment of  railroad  trafhc  were  first  perceived  on  anything  approach- 
ing a  broad  basis  about  the  year  1850.  In  1853  the  famous  New 
York  Central  system  began  to  crystalize,  the  Erie  Railroad  was 
completed  to  Dunkirk,  and  the  foundation  of  the  Pennsylvania 
system  was  laid  by  a  completion  of  a  line  from  Philadelphia  to 
Pittsburg,  and  the  Grand  Trunk  system  had  its  American  begin- 
nings by  leasing  a  line  from  Portland,  running  northwesterly 
through  Maine  and  New  Hampshire.  Massachusetts  awoke  to 
the  interests  of  Boston  by  fostering  the  Boston  and  Albany  R.  R., 
and  pushing  other  feeders  into  Vermont  and  New  Hampshire. 
Up  to  this  time  the  jealousy  between  the  seaboard  states  was. 
severe  and  oft-times  bitter,  in  the  efforts  to  hold  trafhc  for  their 
respective  seaport  cities.  It  was  next  to  impossible  to  obtain  a 
charter  for  a  railroad  to  cross  the  territory  of  one  state,  if  it  di- 
verted traffic  to  the  seaport  of  a  rival  state.  However,  as  I  have 
stated,  in  the  beginning  of  the  fifth  decade  a  broader  national  con- 
ception of  railroad  transportation  was  born. 

Early  rates  were  naturally  based  upon  those  which  prevailed 
under  the  ruder  and  far  more  expensive  systems,  and  profits  were 
enormous.  One  short  line  between  Utica  and  Schenectady,  in 
New  York,  during  fourteen  years  reimbursed  its  shareholders  for 
its  entire  cost,  besides  paying  annual  dividends  of  18^  per  cent. 
Railroad  building  now  progressed  at  a  rapid  rate,  and  the  bases  of 
great  fortunes  were  speedily  laid.  Towns,  cities,  states,  and 
finally  the  United  States  assumed  enormous  financial  burdens  for 
the  development  of  railroads. 


CANADIAN  AND  AMERICAN  RAILWAYS.  155 

The  wealth  and  power  of  the  railway  interests  speedily  devel- 
oped the  inevitable  arrogance,  favoritism  and  corruption,  which 
tainted  the  state  legislatures,  the  courts,  and  even  the  halls  of 
Congress.  The  fair  and  equitable  and  common  law  right  of  the 
public  to  equal  and  impartial  treatment  by  the  corporate  servants 
of  its  own  creation,  was  scouted  and  denied;  state  jurisdiction 
over  traffic  which  crossed  its  border  was  denied,  and  the  Supreme 
Court  of  the  United  States  sustained,  in  the  famous  Wabash  case, 
this  contention.  The  effect  of  this  decision  was  to  intensify  the 
reckless  indifference  of  the  great  railroad  corporations  to  their 
obligations  to  the  public.  The  fortunes  of  men  and  localities  were 
subject  to  the  capricious  or  malicious  purposes  of  railway  man- 
agers. Railway  wrecking  had  become  a  fine  art,  construction 
companies  a  short  cut  to  millionairedom,  while  cut  rates,  secret 
rebates,  live  stock  eveners,  pooling  combinations,  the  shameless 
dishonesty  of  railway  dealings  among  themselves  as  well  as  with 
the  public,  were  current  events.  Uncle  Sam's  puny  railroad  baby 
had,  in  a  few  short  years,  become  a  lusty  giant,  who  threatened 
to  dominate  the  entire  household.  The  remainder  of  Uncle  Sam's 
family  demurred  to  the  situation,  and  are  now  attempting  to 
somewhat  restrain  and  regulate  the  giant  by  the  Interstate  Com- 
merce Law. 

When  bluff  and  honest  Senator  Reagan,  of  Texas,  introduced 
the  first  interstate  measure  in  the  House,  in  1878  and  1879,  he 
was  met  with  contemptuous  ridicule  by  the  railroads,  and  quiet 
incredulity  by  the  people.  His  dogged  and  unyielding  determina- 
tion, however,  culminated  in  the  appointment  of  a  joint  commit- 
tee, which  evolved  the  present  law. 

Railroad  opposition  was  severe  and  unremitting  during  the 
time  the  bill  was  under  consideration,  and  Senator  Cullom  was 
repeatedly  told,  as  the  chief  objection  to  it,  that  he  could  not 
frame  his  bill  so  as  to  bring  Canadian  competitive  lines  within  its 
provisions.  Senator  Cullom  gave  patient  heed  to  this  objection, 
and  I  believe  I  violate  no  confidence  when  I  state,  that  he  visited 
the  city  of  New  York,  obtained  the  services  of  eminent  and  saga- 
cious counsel,  and  so  framed  the  first  section  of  the  act  as  to  bring 
rigidly  within  the  scope  of  the  law  all  competitive  interstate  and 
international  traffic  of  the  Canadian  roads.  No  American  railroad 
attorney  has  yet  been  able  to  point  out  a  flaw  in  this  feature  of 
the  first  section  of  the  act,  and  no  witness,  before  the  Senate  com- 
mittee during  its  recent  tour,  has  even  attempted  to  do  so.  Yet 
we  are  daily  told  by  reckless  newspapers,  and  it  is  steadily  re- 
echoed by  equally  reckless  and  ignorant  persons,  that  Canadian 
railroads  are  not  subject  to  the  interstate  law.  Let  me  read  this 
section  of  the  act : 

''Be  zt  enacted  by  the  Senate  and  House  of  Represe7itatives  of  the  Un'fed 
States  of  America,,  in  Congress  asse7nbled:  That  the  provisions  of  this  act 
shall  apply  to  any  common  carrier  or  carriers  engaged  in  the  transportati   ;    of 


156  CANADIAN  AND  AMERICAN  RAILWAYS. 

passengers  or  property,  wholly  by  railroad  or  partly  by  railroad  and  partly  by 
water  when  both  are  used  under  a  common  control,  management  or  arrange- 
ment, for  a  continuous  carriage  or  shipment  from  one  state  or  territory  of  the 
United  States  or  the  District  of  Columbia,  to  any  other  state  or  territory  of  the 
United  States  or  the  District  of  Columbia,  or  from  any  place  in  the  United 
States  to  an  adjacent  foreign  coimtry,  or  from  any  place  in  the  United  States 
through  a  foreign  country,  to  any  other  place  in  the  United  States,  and  also  to 
the  transportation  in  like  manner  of  property  shipped  from  any  place  in  the 
United  States  to  aforeigii  country,  and  carried  from  such  place  to  a  port  of 
transshipment,  or  shipped fro7n  a  foreign  country  to  any  place  in  the  United 
States,  and  carried  to  such  place  from  a  point  of  entry,  either  in  the  United 
States  or  an  adjacent  foreign  country.  Provided,  however,  that  the  provi- 
sions of  this  act  shall  not  apply  to  the  transportation  of  passengers  or  property, 
or  to  the  receiving,  delivering,  storage  or  handling  of  property  wholly  within 
one  state,  and  not  shipped  to  or  from  aforeig7i  coimtry,  from  or  to  aijy  state 
or  territory  as  aforesaid." 

Every  subsequent  section  of  the  law  is  subject  to  and  controlled 
by  this  first  section,  which  describes  and  brings  within  every  pro- 
vision of  the  entire  law,  as  it  was  designed  to  do,  every  possible 
kind  of  American  traffic  in  which  a  Canadian  road  can  engage. 
What  folly,  then,  for  respectable  railroad  counsel,  leading  news- 
papers and  other  prejudiced  parties,  to  claim  that  Canadian  rail- 
roads are  exempt  from  the  provisions  of  the  law.  In  a  recent 
case  brought  before  the  Interstate  Commerce  Commission,  this 
point  was  raised  under  circumstances  which,  if  ever,  would  justify 
the  claim  of  exemption.  The  Grand  Trunk  road  was  carrying 
coal  at  a  local  rate  from  Buffalo  to  local  points  in  Canada  and 
allowed  a  rebate  from  the  pu'-^)lished  tariff  rates  to  Canadian 
buyers ;  no  American  road  participated  in  the  traffic,  neither  was 
the  traffic  competitive  with  any  American  railroad.  No  American 
shipper  of  or  dealer  in  coal  was  prejudiced  or  affected  in  any  way 
by  the  rebate,  except  favorably,  by  making  a  larger  demand  for 
American  coal.  The  only  American  territory  crossed  by  the 
traffic,  was  included  between  the  Grand  Trunk  freight  station  in 
Buffalo  and  the  center  of  the  International  Bridge  crossing  the 
Niagara  river.  Nevertheless,  the  commission  held  that  even  this 
traffic  was  subject  to  the  act,  and  that  the  rebates  were  unlawful. 
The  Grand  Trunk  gracefully  acquiesced  in  this  ruling,  and  at 
once  withdrew  all  rebates.  This  decision  settles  once  for  all,  that 
every  provision  of  the  act  is  to  be  strictly  construed  against 
Canadian  roads.  It  does  not,  however,  and  will  not,  prevent  com- 
petitive American  interests,  through  their  organs  and  their  agents, 
from  serenely  and  unceasingly  reiterating  the  unfounded  assertion 
of  exemption. 

Some  one  may  ask  what  is  the  secret  spring  and  moving  cause 
of  the  present  agitation  for  additional  restrictive  legislation  against 
Canadian  lines.  It  certainly  has  not  been  asked  for  by  the  masses 
of  the  people,  the  great  body  of  producers  and  consumers,  for 
they  are  well  aware  of  the  invaluable  regulative  influence  of  the 
Canadian  lines  in  establishing  reasonable  rates  of  freight.  If  the 
manager  of  a  great  American  railway  system  like  the  Vanderbilt 


CANADIAN  AND  AMERICAN  RAILWAYS.  157 

or  Pennsylvania,  desired  to  cripple  or  destroy  a  powerful  Canadian 
competitor,  and  by  false  and  misleading  statements  and  claims, 
could  induce  Congress  to  assist  in  the  work,  the  measures  which 
set  on  foot  the  present  agitation,  might  perhaps  be  adopted. 

Such  a  movement  may  be  legitimate  and  proper  from  the  stand- 
point of  a  railroad  struggle  for  business,  and  as  between  American 
and  Canadian  railroads  or  other  institutions  from  the  political 
point  of  view,  my  patriotism  would  compel  me  to  unhesitatingly 
support  the  American.  When,  however,  as  in  the  present  case, 
political  relations  are  merely  a  mask  to  hide  a  great  wrong  upon 
the  people,  by  restricting  or  prohibiting  desirable  competition, 
that  same  patriotism  forces  me  to  the  defense  of  the  people,  even 
through  the  means  of  alien  agencies.  The  competitive  struggle 
between  American  and  Canadian  railroads  is  not  a  new  one.  It 
has  raged  with  exceeding  bitterness  for  many  years,  and  to  the 
enormous  advantage  of  the  people.  It  had  its  beginnings  in  New 
England  under  the  following  circumstances,  which  were  related 
to  me  only  two  months  ago  in  the  city  of  Boston,  by  one  of  the 
most  prominent  manufacturers  of  boots  and  shoes  in  New  England : 

In  the  days  when  the  avenue  for  Boston  trade  with  the  West 
was  confined  to  what  is  now  the  Boston  and  Albany  R.  R. ,  freight 
rates  were  so  high  that  Boston  was  in  imminent  danger  of  losing 
her  boot  and  shoe  trade.  Certain  lines  of  goods  were  charged 
$1.50  per  100  pounds  to  Chicago.  The  merchants  united  in  strong 
remonstrances  to  the  railroad  company,  but  to  no  avail.  A  cer- 
tain railroad  man  suggested  that  perhaps  the  Grand  Trunk  of 
Canada  could  be  induced  to  form  a  through  line  to  Chicago  in  con- 
junction with  certain  connecting  roads.  The  merchants  sent  him 
to  Montreal.  After  several  days  of  negotiations  he  returned  with  a 
proposition  that,  if  the  shoe  trade  would  give  its  entire  business 
to  the  Grand  Trunk  for  one  year,  that  corporation  would  carry  it 
to  Chicago  for  50  cents  per  100  pounds.  Such  an  agreement  was 
quickly  drawn  and  signed,  and  the  new  line  established.  The 
Boston  and  Albany  immediately  lowered  its  rate  from  $1.50  to  30 
cents  per  100  pounds,  but  the  shippers  gave  it  no  traffic,  but  man- 
fully and  honestly  fulfilled  their  contract  with  the  Grand  Trunk. 
The  merchants  and  manufacturers  have  never  forgotten  this  act 
of  the  Grand  Trunk,  and  every  business  man  in  Boston  will  fight 
to  the  bitter  end  every  scheme  to  unfairly  prejudice  or  injure  it. 

In  1875  the  city  of  Chicago  was  suffering  from  a  great  diversion 
of  trade  to  western  and  southwestern  points,  under  the  pooling 
system  of  the  American  trunk  lines,  then  in  vogue.  This  diver- 
sion assumed  such  proportions  as  to  call  for  the  appointment  of  a 
committee  of  her  ablest  merchants  to  investigate,  and  suggest  a 
remedy.  In  1876  the  committee  made  its  report,  and  suggested 
as  the  most  feasible  remedy  that  the  Grand  Trunk  be  urged  to 
extend  its  system  from  Port  Huron  to  Chicago.  In  1880  this  ex- 
tension was  completed,  and  from  that  hour  to  this,  Chicago  mer- 


158  CANADIAN  AND  AMERICAN  RAILWAYS. 

chants  have  been  practically  a  unit  in  asserting  and  insisting  upon 
the  necessity  of  the  competition  afforded  by  this  road,  as  a  check 
upon  the  American  trunk  lines.  The  bold  and  uncompromising 
position  taken  by  them  before  the  Senate  committee  a  few  weeks 
ago,  astonished  the  committee,  who  were  evidently  unprepared 
for  any  such  demonstration.  No  later  than  last  Wednesday 
(August  2 1  St)  Judge  Cooley  himself  is  reported  in  a  Chicago 
newspaper  interview  to  have  said:  "  The  attitude  of  the  Chicago 
Board  of  Trade  in  its  defense  of  the  Canadian  low  rates  is  a  sur- 
prise to  me,  in  view  of  the  fact  that  these  Canadian  low  rates  are 
mainly  instrumental  in  building  up  northwestern  towns  like  Min- 
neapolis, St.  Paul  and  Duluth,  to  the  detriment  of  Chicago."  It 
is  unquestionably  true  that  the  Canadian  Pacific  or  Soo  route  is 
diverting,  and  will  in  an  increasing  ratio  continue  to  divert  a  large 
amount  of  traffic  of  certain  kinds  from  Chicago  to  the  northwest, 
and  Judge  Cooley 's  surprise  is  all  the  more  a  tribute  to  the  broad 
intelligence  and  sagacious  judgment  of  the  ablest  and  most  ener- 
getic merchants  of  this  country,  which  teach  them  to  look  below 
the  surface  of  the  matter  and  detect  the  far  greater  danger  to 
their  city's  commercial  supremacy  which  would  follow  the  prohibi- 
tion or  serious  crippling  of  Canadian  competition.  If  the  news- 
paper reports  Judge  Cooley  correctly,  I  must  in  turn  confess  my 
surprise  at  some  of  his  additional  statements,  in  view  of  the  im- 
portant and  quasi- judicial  position  he  occupies.  He  says :  "  Cana- 
dian competition  hurts  the  railways  of  this  country,  and  anything 
tending  to  damage  them  must  also  affect  Chicago,  which  is  so 
largely  made  by  them."  "  If,"  he  says,  "the  railways  of  this 
country  do  not  make  shippers  as  low  a  rate  as  Canadian  roads,  I 
think  it  is  because  they  cannot,  and  it  will  only  make  matters 
worse  to  encourage  Canadian  trade  that  will  hurt  them  still  more. 
American  roads  will  make  the  best  rate  they  can,  and  it  is  to  Chi- 
cago's interest  to  meet  them  half  way."  Can  it  be  that  Judge 
Cooley  has  become  oblivious  to  the  fact  that  the  American  public 
is  a  larger  consideration  than  American  railways;  that  low  rates 
for  American  traffic  are  more  important  to  the  enormous  commer- 
cial and  manufacturing  interests  of  large  areas  of  our  country 
from  New  England  to  the  Pacific  slope,  than  that  fat  dividends 
should  be  earned  by  American  railroads?  If  it  is  true,  which  I 
deny,  that  oui  roads  cannot  give  as  low  rates  as  their  Canadian 
competitors,  it  is  a  humiliating  and  disgraceful  confession,  and 
calls  for  an  immediate  scaling  down  to  an  honest  basis,  of  the  two 
and  one-half  billions  of  watered  and  fictitious  capital  which  H.  W. 
Poor,  the  great  railroad  statistician  says,  is  represented  in  Ameri- 
can railway  plant. 

Can  it  be  that  Judge  Cooley  forgets  that  the  people  erected  the 
great  tribunal  of  which  he  is  the  head,  for  the  express  purpose  of 
securing  their  rights  against  railway  encroachment ;  that  the  pro- 
hibition of  pooling  and  the  long  and  short  haul  clause  in  the  act 


CANADIAN  AND  AMERICAN  RAILWAYS.  159 

were  expressly  designed  to  produce  the  most  open  and  unrestricted 
competition  and  low  rates,  and  secure  their  benefits  to  the  public? 

The  field  of  commercial  enterprise  is  necessarily  less  familiar  to 
Judge  Cooley  than  to  Chicago  merchants.  They  know  from  ex- 
perience and  training,  as  he  does  not,  that  the  commercial  inter- 
ests of  their  city  do  not  depend  upon  the  destruction  of  its  north- 
western rivals,  but  will  thrive  with  their  development. 

This  question  assumes  a  still  broader  aspect  when  tested  by  the 
provisions  of  the  Constitution  of  the  United  States.  The  6th  sub- 
division of  section  9th,  article  i,  of  that  instrument,  says:  "No 
preference  shall  be  given  by  any  regulation  of  commerce  or  rev- 
enue to  the  ports  of  one  state  over  those  of  another."  The  Inter- 
state Commerce  law  is  the  first  important  legislation  by  Congress 
to  regulate  commerce  between  the  states,  and  the  mere  suggestion 
that  the  port  of  Chicago  should  favor  its  amendment  to  the  disad- 
vantage of  the  port  of  Duluth,  the  port  of  Sault  Ste.  Marie,  or 
any  other  port,  in  direct  violation  of  the  Constitution  of  the  United 
States,  sounds  strangely  enough  from  the  head  of  the  Interstate 
Commerce  Commission.  I  would  fain  believe  that  the  reporter 
misstated  the  remarks  of  our  honored  fellow  citizen  and  judge. 

It  is  urged  that  American  railways  have  ample  capacity  for 
carrying  all  the  American  trafiic,  and  the  larger  portion  of  this 
country  never  has  had,  and  never  will  have  occasion  to  use  Cana- 
dian lines  of  transportation,  which  are  consequently  of  little  or  no 
real  value  outside  of  certain  areas  along  our  northeastern,  north- 
ern and  norwestern  borders.  A  proper  apprehension  of  the  basis 
on  which  through  rates  of  freight  are  made  in  this  country,  will 
destroy  this  claim  once  for  all. 

A  standard  or  unit  freight  rate  is  first  established  between  Chi- 
cago and  New  York.  All  the  stations  which  take  through  rates, 
which  practically  includes  the  whole  of  them,  lying  north  of  the 
Ohio  and  east  of  the  Mississippi  rivers,  are  divided  into  groups  by 
imaginary  lines  drawn  north  and  south.  All  the  stations  in  each 
group  take  the  same  specified  percentage  of  the  Chicago  or  unit 
rate.  The  through  or  seaboard  rates  for  all  points  along  and  east 
of  the  Missouri  and  west  of  the  Mississippi  rivers,  are  make  by 
adding  the  local  rate  to  Chicago,  to  the  standard  or  unit  rate  from 
Chicago.  When  lake  navigation  is  closed  the  competition  of 
Canadian  railways  is  the  most  potent  factor  in  influencing  the  es- 
tablishment by  American  railways  of  a  reasonable  standard  or 
unit  rate  from  Chicago.  Thus  it  is  that  practically  the  entire 
through  traffic  of  the  country,  whether  actually  passing  over 
Canadian  routes  or  not,  receives  an  absolute  and  direct  benefit 
from  Canadian  competition. 

The  agitation  against  Canadian  railroads  publicly  began  Feb- 
uary  loth,  1888,  when  General  J.  H.  Wilson,  of  Wilmington,  Del., 
appeared  before  the  Senate  Committee  on  Interstate  Commerce  at 
Washington  with  a  long  tirade  against  these  foreign  corporations. 


l6o  CANADIAN  AND  AMERICAN  RAILWAYS. 

Gen.  Wilson  was  a  famous  and  successful  cavalry  officer  in  the 
war  of  the  rebellion,  and  commanded  the  troops  which  captured 
Jeff.  Davis  and  Senator  Reagan,  then  Postmaster-General  of  the 
Confederacy.  Gen.  Wilson,  after  the  war,  became  manager  of  a 
railroad  in  Indiana,  and  later  the  president  of  the  New  York  and 
New  England  R.  R.,  which,  it  is  said,  he  handled  with  indifferent 
success.  He  then  opened  a  broker's  office  in  Wall  street,  which  was 
closed  by  his  financial  failure.  He  next  became  the  public  cham- 
pion of  American  railways  as  against  Canadian,  the  financial  out- 
come of  which  does  not  yet  appear.  March  i6th,  1888,  he  repeated 
his  attack  upon  Canadian  railways  before  the  House  Committee  on 
Commerce.  The  New  York  Sun  then  appeared  as  the  newspaper 
organ  of  the  agitation,  printed  Wilson's  speeches  in  full,  and  has. 
steadily  pushed  the  fight  from  that  date.  The  various  merchants' 
organizations  in  Portland,  Boston,  Detroit,  Chicago,  Milwaukee, 
Minneapolis,  St.  Paul,  Duluth  and  Peoria  immediately  adopted 
resolutions  protesting  against  Wilson's  scheme,  which  were  hurried 
forward  to  their  respective  Senators  and  Representatives  in  Wash- 
ington. Nevertheless,  about  the  middle  of  April,  Amos  J.  Cum- 
mins, member  of  Congress  from  Brooklyn,  N.  Y.,  and  official 
correspondent  of  the  New  York  Sun,  introduced  into  the  House  of 
Representatives  a  set  of  resolutions  calling  for  the  prohibition  of 
Canadian  railroads  from  carrying  American  traffic.  These  reso- 
lutions were  referred  to  the  House  Committee  on  Commerce,  where 
they  expired  with  the  last  session  of  Congress. 

The  subject  next  appeared  in  Congress  in  the  guise  of  an 
amendment  proposed  by  Senator  Morgan,  of  Alabama,  to  the 
Senate  tariff  bill,  to  the  effect  of  prohibiting  the  importation  in 
bond  through  American  ports,  of  merchandise  designed  for  Cana- 
dian points.  This  was  fortunately  defeated  by  a  majority  of  only 
one,  on  a  strictly  party  vote.  Congress  next  took  notice  of  the 
subject  by  authorizing  the  Senate  Committee  on  Commerce  to 
make  a  tour  of  the  country  and  investigate  the  relations  of  Ameri- 
can and  Canadian  railways  and  waterways.  This  committee  has 
visited  New  York,  Boston,  Detroit  and  Chicago,  and  will  make  a 
report  to  the  next  Con'gress.  Every  merchant  or  commercial  rep- 
resentative who  has  appeared  before  this  committee  has  entered 
his  decided  protest  against  any  legislation  tending  to  the  prohibi- 
tion or  restriction  of  Canadian  competition.  The  object  of  this 
convention  is,  I  take  it,  to  give  added  emphasis  to  these  protests. 

Eternal  vigilance  will  doubtless  be  necessary  if  we  shall  retain 
these  priceless  competitive  privileges. 

There  are  seventy-six  Senators  and  three  hundred  and  twenty- 
five  Representatives  in  Congress,  exclusive  of  the  four  recently 
added  states,  comparatively  few  of  whom  are  conversant  with  the 
details  of  this  question,  and  the  majority  of  whom  represent  con- 
stituencies remote  from  immediate  contact  with  Canadian  routes. 
With  the  deceptive  cry  of  '  'protection  to  American  railways  against 


CANADIAN  AND  AMERICAN  RAILWAYS.  i6i 

foreign  rivals,  built  with  foreign  capital  and  subsidized  by  a  for- 
eign government,"  a  powerful  opposition  to  Canadian  routes  can 
easily  be  organized.  The  struggle  has  only  begun,  and  before  it 
is  ended,  the  immense  commercial  interests  dependent  upon  these 
routes,  may  need  to  make  very  vigorous  efforts  in  their  defense. 

The  Canadian  Pacific  railway,  which  is  so  closely  allied  with  the 
hopes  and  prospects  of  this  bustling,  energetic  city  of  Sault  Ste. 
Marie,  is  the  especial  target  of  attack. 

It  is  a  great  corporation,  honestly  built  and  efficiently  and  eco- 
nomically managed,  by  men  who  obtained  their  training  in  the 
service  of  the  American  railways,  who  combine  Yankee  push  and 
and  energy  with  English  grit  and  solidarity.  The  enterprise  has 
been  conducted  with  the  care  and  sagacity  which  would  character- 
ize a  private  business  venture.  No  construction  companies  nor 
credit  mobilers  have  been  permitted  to  defraud  its  shareholders. 
It  runs  its  own  grain  elevators,  telegraph,  express  and  sleeping 
car  lines.  It  tenders  to  American  producers  and  consumers,  the 
resulting  facilities  of  the  most  marvelous  railroad  undertaking  of 
the  age.  The  foreign  capital  invested  in  it  is  but  a  fraction  of  the 
foreign  investments  which  help  to  swell  the  capital  of  American 
railways  to  the  enormous  total  of  upwards  of  nine  billions  of 
dollars. 

The  capital  of  some  of  the  American  railways  is  almost  wholly 
owned  abroad,  notably  that  of  the  Illinois  Central  R.  R.,  and 
there  is  no  doubt  but  what  the  total  amount  of  English,  Dutch 
and  German  holdings  in  American  railways  would  build  several 
Canadian  Pacific  lines.  The  argument  against  this  corporation 
on  the  basis  of  its  foreign  capital  is  utterly  absurd  and  senseless. 
Equally  senseless  is  the  argument  based  on  the  subsidies  from  the 
Dominion  Government.  The  actual  amount  of  these  is  between 
ninety  and  one  hundred  millions,  while  the  Union  and  Central 
Pacific  lines  will  have  received  municipal  and  government  subsidies 
by  1895,  when  its  bonds  are  matured  and  paid,  the  enormous  total 
of  more  than  four  hundred  and  forty-seven  millions  of  dollars. 
These  are  official  figures  furnished  by  Mr.  Patterson  in  his  minor- 
ity report,  as  a  member  of  the  Pacific  railroad  commission,  ren- 
dered to  Congress  at  its  last  session.  As  yet  no  one  has  had  the 
hardihood  to  challenge  the  truth  of  these  figures.  From  the  pro- 
ceeds and  profits  of  this  colossal  deal,  together  with  a  heavy  gov- 
ernment subsidy,  has  since  been  constructed  another  transconti- 
nental line,  the  Southern  Pacific,  the  managers  and  owners  of 
which  rend  the  morning  air  with  their  shrieks  and  groans  of  pov- 
erty, as  they  point  to  their  inability  to  compete  with  the  dreadful, 
subsidized  Canadian  Pacific. 

The  comical  aspect  of  the  situation  would  provoke  our  laughter, 
did  not  a  sense  of  our  national  disgrace  flush  our  cheeks  with 
shame. 

The  most  reckless  statements  are  made  as  to  the  amotmt  of 


i62  CANADIAN  AND  AMERICAN  RAILWAYS. 

subsidies  paid  over  by  the  Dominion  government;  Mr.  Joseph 
Nimmo,  late  statistician  to  the  United  States  Treasury,  placing 
the  amount  at  from  two  hundred  and  fifteen  to  two  hundred  and 
twenty-five  millions.  Now,  the  gross  federal  debt  of  Canada  at 
the  close  of  1887  was  about  two  hundred  and  twenty-seven  mil- 
lions of  dollars,  all  told,  or  but  a  little  more  than  Mr.  Nimmo's 
subsidy,  while  in  1881,  the  year  in  which  the  Canada  Pacific  was 
begun,  the  federal  debt  was  upwards  of  one  hundred  and  fifty-five 
millions.  These  figures  tell  their  own  story  and  characterize  Mr. 
Nimmo's.  Another  bugbear  is  the  annual  subsidy  of  three  hun- 
dred thousand  dollars  paid  by  the  British  and  Canadian  govern- 
ments for  the  carriage  of  the  mails  from  Halifax  to  Hong  Kong. 
This  is  construed  into  a  military  menance  of  the  United  States, 
Much  more  then  must  the  fact  that  the  United  States  government 
pays  more  than  twenty  millions  annually  to  American  railways  for 
the  transportation  of  its  mails,  be  construed  as  a  military  menance 
of  Canada.  The  fact  is  that  while  subsidies  are  desirable  as  a 
means  of  swelling  the  profits  of  railroad  projectors  and  builders, 
they  are  not  depended  upon  as  a  measure  of  the  ability  of  one 
road  to  compete  with  another.  This  is  abundantly  proven  by  the 
fact  that  three  more  transcontinental  lines  are  already  projected 
by  American  railway  men,  neither  one  of  which  asks  or  expects 
any  material  government  aid.  The  argument  is  likewise  unten- 
able which  is  based  on  the  advantage  possessed  by  the  Canadian 
roads  under  the  long  and  short  haul  clause  of  the  Interstate  Com- 
merce act,  but  time  will  not  permit  its  consideration  now. 

Concealed  behind  all  the  specious  arguments  of  the  American  rail- 
way interests,  lies,  in  my  opinion,  a  pre-concerted  determination  to 
have  Congress  legalize  pooling,  and  leave  the  reasonableness  of  rates 
to  the  Interstate  Commerce  Commission  to  determine.  Should 
this  be  accomplished,  the  regulative  influence  of  Canadian  lines 
in  making  rates  reasonable,  would  cease  to  be  of  value,  and  except 
in  certain  localities  like  Detroit  and  Sault  Ste  Marie  they  would 
assume  the  position  of  poachers  upon  American  traffic,  while  rend- 
ering no  equivalent  in  return.  Under  such  circumstances  a  de- 
mand for  their  expulsion  from  American  territory  would  be  much 
less  easily  met  than  now.  The  forces  arrayed  against  us  have 
unlimited  command  of  resources,  are  powerful  and  subtle  in  their 
operations,  and  able  to  wage  a  long  fight,  which,  if  successful, 
means  such  enormous  additions  of  revenue  to  the  victors. 

In  1 866  the  transportation,  in  bond,  of  American  traffic  across 
Canadian  territory,  was  authorized  by  act  of  Congress.  Based 
upon  this  act  millions  of  dollars  of  American  capital  have  been 
invested,  not  only  in  constructing  connecting  lines  of  railway,  but 
in  the  countless  industries  and  enterprises  dependent  upon  them. 
This  legislation  ante-dates  and  is  wholly  independent  of  the  fish- 
eries question,  which  arises  under  the  expiration  of  the  Washing- 
ton treaty,  executed  in  187 1,  and  should  not  be  confounded  with 


CANADIAN  AND  AMERICAN  RAILWAYS.  163 

it.  For  twenty-three  years  the  government  of  the  United  States 
has  maintained  inviolate  this  privilege  for  the  people,  which  it  is 
now  asked  to  yield  to  the  already  menacing  predominance  of 
American  railways. 

Happily  public  sentiment  has  not  yet  abdicted  the  reins  of  power 
in  this  country,  and  the  people,  if  sufficiently  informed  and  aroused, 
will  still  hold  their  own. 


SOME  CHARACTERISTICS  OE  THE  AMERICAN 
RAILWAY  SYSTEM. 

Hon.  Joseph  Nimmo^  Jr. 

Excerpt  from  an  argument  delivered  before  the  United  States  Senate  Committee  on  Inter- 
state Commerce. 

The  agreements  and  combinations  whereby  the  American  rail- 
road system  has  become  a  great  and  beneficent  possibility  are  the 
natural  outcome  of  the  harmonies  existing  between  railroad  inan- 
agement  and  the  commercial,  industrial,  and  social  needs  of  the 
country,  and  it  is  clearly  evident  that  those  harmonies  should  be 
allowed  to  work  out  the  beneficent  results  of  self-government 
among  the  companies,  the  national  government  sanctioning  and 
giving  effect  to  the  wholesome  restraints  and  beneficent  require- 
ments of  such  self-government  and  punishing  infractions  thereof. 
This  is  evidently  in  harmony  with  the  spirit  of  our  institutions  and 
with  the  general  policy  of  the  law,  and  it  appears  to  be  dictated 
alike  by  reason  and  the  clear  indications  of  experience.  There  is 
really  no  other  practical  line  of  policy  which  the  country  can  now 
pursue.  But  there  are  certain  disabilities  and  defects  which 
characterize  the  American  railroad  system,  certain  lessons  of  ex- 
perience which  have  an  exceedingly  important  bearing  upon  the 
question  of  regulation.  When  all  those  intimate  combinations  for 
the  direct  transportation  of  the  mails,  of  express  goods,  of  pas- 
sengers, and  of  freights  had  been  formed,  the  managers  of  the 
different  lines  realized  that  to  a  very  great  extent,  and  in  vitally 
important  particulars,  they  had  lost  their  independent  character  as 
rate  makers,  and  had  become  essentially  dependent  parts  of  one 
great  American  railroad  system.  This  was  an  unlooked  for  and  in 
many  cases  an  appalling  result  to  the  railroad  managers.  Some 
of  the  stronger  companies  attempted  to  resist  this  conclusion  by 
such  extension  of  their  lines  as  would  enable  them  to  remain  a 
law  unto  themselves,  but  in  time  they  too  were  forced  to  acknowl- 
edge the  compulsion  of  their  interdependent  relationships. 

The  combinations  entered  into  among  the  railroad  companies 
have  had  two  results  of  the  highest  importance  to  the  whole 
country.     First,  an  enormously  increased  efficiency  in  the  work  of 

Reprinted  by  permission  from  the  Railway  Review  of  July  19,  1892, 


THE  AMERICAN  RAILWAY  SYSTEM.  165 

transportation,  and,  second,  marvelous  reductions  in  the  cost  of 
transportation.  But  beyond  any  power  of  resistance  on  the  part 
of  the  companies,  the  control  of  rate  making  slipped  from  the 
hands  of  railroad  managers  and  became  subject  to  a  great  variety 
of  competing  forces  of  transportation  and  of  trade.  For  several 
years  the  traffic  interests  of  the  railroads  ran  at  loose  ends.  The 
oldest  and  ablest  traffic  managers  became  dazed  by  the  complex 
conditions  of  an  environment  which  had  overshadowed  them  al- 
most without  their  notice.  Year  by  year  they  saw  the  difficulties 
of  the  situation  gathering  stronger  above  them.  Rate  agreements 
became  mere  idle  talk,  and  rates  went  down,  down,  down.  Many 
companies  were  forced  into  bankruptcy,  and  financial  ruin  stared 
many  others  in  the  face.  The  union  of  railroads  had  developed 
enormous  possibilities  to  the  commercial  and  industrial  interests 
of  the  country,  but  it  had  stricken  the  companies  with  impotency. 
If  no  relief  had  been  discovered  the  inevitable  result  would  have 
been  a  general  railroad  bankruptcy,  culminating  in  one  great  rail- 
road corporation.  Such  a  combination  would,  however,  have 
transcended  any  possible  beneficial  exercise  of  administrative  abil- 
ity. The  particular  problem  which  confronted  the  companies  was 
how  to  maintain  just  and,  at  the  same  time,  fairly  remunerative 
rates. 

But  the  unavoidable  and  most  mischievous  consequence  of  this 
state  of  affairs  was  that  absurd  and  ruinous  discriminations  arose 
and  rates  fluctuated  violently.  This  obviously  resulted  from  the 
fact  that  there  was  no  balance  wheel  to  the  newly-formed  Ameri- 
tan  railroad  system ;  no  organization,  and  no  administrative  gov- 
ernment competent  to  preserve  order  or  to  secure  just  and  equi- 
table methods  of  procedure.  This  state  of  affairs  was  in  the  highest 
degree  prejudicial  to  the  interests  of  commerce  and  of  all  indus- 
trial enterprise.  Its  effect  upon  trade  was  utterly  demoralizing. 
The  particular  problem  which  challenged  the  attention  of  thought- 
ful men  was,  how  to  correct  certain  incidental  evils  attaching  to 
the  grandest  and  most  beneficent  system  of  transportation  which 
the  world  had  ever  seen. 

Evidently  the  difficulty  was  one  to  be  solved  mainly  by  railroad 
managers.  At  length  some  of  the  abler  railroad  managers,  who 
comprehended  the  whole  situation,  saw  clearly  that  the  one  thing 
needful  was  some  sort  of  an  agreement  or  plan  in  the  nature  of 
self-government  whereby  the  various  traffic  combinations  could  be 
administered,  and  thus  order  be  brought  out  of  chaos.  The  plan 
which  rapidly  came  into  vogue  was  the  federation  of  the  railroads 
into  associations  upon  the  basis  of  agreements  as  to  the  share  of 
the  competitive  traffic  which  should  be  awarded  to  each. 

No  other  expedient  had  previously,  or  has  since,  been  devised 
which  has  supplied  a  remedy  for  the  evils  of  violently  fluctuating 
rates  and  of  rate  cutting.  These  administrative  combinations 
embraced  the  publicity  of  rates,  timely  notice  of  changes  in  rates, 


1 66  THE  AMERICAN  RAILWAY  SYSTEM. 

and  agreement  as  to  the  division  of  traffic.  Each  one  of  these  re- 
quirements was  at  once  a  restraint  upon  reckless  and  destructive 
rate  wars  and  a  means  of  maintaining  the  orderly  conduct  of  the 
American  railroad  system.  They  had  no  other  object  in  view, 
expressed  or  implied,  and  they  met  clearly  expressed  commercial 
demands. 

The  federations  thus  formed  were  merely  voluntary  associations, 
and  yet  they  were  productive  of  such  excellent  results  that  they 
were  hailed  as  the  correct  solution  of  the  whole  problem  of  ad- 
ministrative reform.  It  was  also  seen  that  they  were  in  perfect 
harmony  with  the  American  idea  of  regulating  the  commercial 
and  industrial  interests  of  the  country  by  measures  in  the  nature 
of  self-government,  and,  therefore,  that  they  constituted  no  de- 
parture from  established  methods  of  governmental  procedure. 

These  agreements  for  self-government  were  entered  into  for  the 
single  purpose  of  meeting  absolutely  necessary  administrative  re- 
quirements. They  were  forced  upon  the  companies  by  the  logic 
of  events,  and  they  had  been  almost  reluctantly  submitted  to  by 
them  as  restraints  upon  their  freedom  to  indulge  in  practices  in 
the  highest  degree  detrimental  to  the  public  interests.  But  in  the 
face  of  these  facts  many  sincere  but  deluded  complainants  against 
the  very  evils  which  sueh  agreements  were  especially  designed  to 
overcome  joined  in  a  chorus  of  denunciation  against  them.  This 
opposition  appears  to  have  arisen  mainly  from  the  fact  that  the 
mean  and  inappropriate  name  of  "pooling"  had  been  given  to 
agreements  as  to  a  division  of  competitive  traffic.  The  changes 
were  also  rung  upon  the  word  ' 'combination,"  as  though  the 
American  railroad  system  with  all  its  beneficent  results  was  not 
the  natural  evolution  of  intimate  railroad  combinations,  approved 
and  promoted  by  a  statute  never  called  in  question,  and  as  though 
the  intelligence  and  spirit  of  the  age  did  not  everywhere,  in  labor, 
in  commerce,  in  industry,  aAd  even  in  agriculture,  demand  the 
regulation  of  competition  through  combination  as  an  essential 
condition  of  modern  progress. 

Thus  an  organized  means  of  governing  the  American  railroad 
system  for  the  protection  of  the  public  interests  was  treated  by 
certain  misguided  men  as  a  measure  opposed  to  the  public  inter- 
ests. 

When  the  "Bill  to  Regulate  Commerce"  was  reported  from  the 
Senate  Committee  on  Interstate  Commerce,  May  13,  1886,  it  con- 
tained a  clear  and  earnest  protest  against  interference  with  the 
measures  of  self-restraint  which  had  been  adopted  by  the  railroad 
managers.  In  the  splendid  report  submitted  January  18,  1886, 
by  Senator  CuUom,  it  is  stated  that  "the  ostensible  object  of  pool- 
ing is  in  harmony  with  the  spirit  of  regulative  legislation,"  and  he 
further  declared  that  if  such  '  'agreements  between  carriers  should 
prove  necessary  to  the  success  of  a  system  of  established  and  pub- 
lic rates,  it  would  seem  wiser  to  permit  such  agreements  than  by 


THE  AMERICAN  RAILWAY  SYSTEM.  167 

prohibiting  them,  to  render  the  enforcement  and  maintenance  of 
agreed  rates  impracticable." 

Senator  Piatt  of  Connecticut,  re-enforced  these  views  in  one  of 
the  ablest  speeches  ever  delivered  in  Congress  upon  a  commercial 
subject.  He  maintained  that  agreements  as  to  a  division  of  com- 
petitive traffic  constitute  wholesome  restraints  upon  reckless  and 
ruinous  competition,  that  they  prevent  unjust  discrimination  in 
rates,  and  that  their  obvious  tendency  is  to  restore  the  orderly 
conduct  of  commerce. 

The  New  York  chamber  of  commerce,  the  Minneapolis  board 
of  trade,  the  Peoria  board  of  trade,  and  other  commercial  bodies, 
declared  in  favor  of  allowing  the  railroads  to  enter  into  agreements 
as  to  the  division  of  competitive  traffic  for  the  purpose  of  main- 
taining rates. 

The  Minneapolis  board  of  trade,  in  its  appeal  to  Congress,  said 
boldly  and  truly :  '  'The  railroad  pool  honestly  administered  is  the 
natural  balance  wheel  of  interstate  commerce." 

The  leading  men  of  the  New  York  board  of  trade  and  transpor- 
tation, an  organization  formed  for  the  special  purpose  of  correcting 
the  evils  affecting  railroad  transportation,  had  become  convinced 
that  the  division  of  traffic  had  proved  to  be  a  beneficial  expedient 
of  self-government  among  the  roads,  and  that  it  had  suppressed 
the  evils  which  at  one  time  threatened  to  throw  the  commerce  of 
the  metropolis  into  confusion. 

But  in  the  face  of  all  these  opinions  and  of  abundant  evidence 
supporting  them,  the  "anti-pooling  section"  was  forced  into  the 
Senate  bill,  and  with  that  absurd  and  suicidal  provision  it  became 
law. 

The  natural  result  of  the  elimination  of  the  essential  principle 
of  self-government  from  the  associations  formed  by  the  companies 
for  that  purpose  has  been  that  against  a  solid  rock  of  practical 
wisdom  drawn  from  the  hard  lessons  of  experience  the  Interstate 
Commerce  Commission  has  for  the  last  five  years,  and  is  today, 
butting  its  head.  The  very  difficulty  anticipated  has  been  real- 
ized ;  prohibition  of  agreements  for  the  division  of  traffic  has  in- 
creased the  difficulties  of  maintaining  rates. 

The  present  state  of  affairs  would  be  infinitely  worse  were  it  not 
for  the  fact  that  in  the  face  of  enormous  difficulties  the  companies 
have  managed  to  maintain  their  administrative  organizations  for 
the  orderly  conduct  of  the  American  railroad  system.  Thus,  to 
some  extent,  the  mischief  done  by  the  law  has  been  averted. 

It  would  be  an  impeachment  of  the  common  sense  of  the  gen- 
tlemen who  have  composed  the  Interstate  Commerce  Commission 
to  assume  that  they  have  not  clearly  perceived  the  blunder  which 
was  made  at  the  beginning  in  abolishing  the  principle  of  self-con- 
trol from  the  regulation  of  our  internal  commerce  over  railroads. 
The  commission  has,  however,  seen  fit  to  pursue  a  sort  of  pruden- 
tial policy  in  regard  to  the  whole  matter.     They  have  not  com- 


1 68  THE  AMERICAN  RAILWAY  SYSTEM. 

mitted  themselves  to  the  absurdity  of  defending  this  provision  of 
the  law,  nor,  on  the  other  hand,  have  they  exposed  themselves  to 
any  dangers  which  might  be  involved  in  reporting  against  its  pro- 
visions. Taking  a  middle  course,  they  have  simply  stated  what 
the  law  is,  and  have  had  recourse — although  rather  ineffectually — 
to  the  arsenal  of  remedies  which  it  provides,  viz :  Fines  and  im- 
prisonment. I  believe  that  it  is  folly  to  expect  that  the  error  of 
eliminating  the  essential  principle  of  self-government  from  the 
conduct  of  the  American  railroad  system  can  possibly  be  cured  by 
any  such  attempted  administration  by  the  Interstate  Commerce 
Commission.  The  provision  of  the  act  to  regulate  commerce 
which  compels  this  futile  effort  is  evidently  un-American  in  spirit 
as  well  as  in  form,  and  there  is  in  the  attendant  circumstances  of 
the  case  nothing  whatever  which  can  possibly  justify  such  an 
abandonment  of  the  fundamental  principles  of  self-governinent 
cherished  and  proclaimed  by  the  men  who  wrote  the  Declaration 
of  Independence  and  who  framed  the  Constitution  of  the  United 
States. 

In  this  connection  I  desire  briefly  to  advert  to  certain  of  the  con- 
trolling characteristics  of  our  vast  American  railroad  system. 

1.  There  are  now  about  170,000  miles  of  railroad  in  the  United 
States,  the  approximate  value  of  which  is  not  far  from  $10,000,- 
000, 000.  But  the  annual  value  of  the  products  of  the  country 
transported  by  the  railroads  is  undoubtedly  over  three  times  this 
amount,  and  more  than  thirty  times  the  annual  gross  amount  of 
railroad  receipts  from  traffic.  Every  article  transported  has  a 
direct  influence  upon  rate  making.  ■ 

2.  The  evils  and  mischief s  which  have  engaged  the  attention  of 
the  commission  are  due  mainly  to  two  clearly  apparent  causes  al- 
ready mentioned :  First,  the  fact  that  the  combinations  entered 
into  by  companies  in  order  to  form  the  American  railroad  system 
to  a  great  extent  destroyed  the  independent  rate  making  power  of 
the  companies ;  and  second,  the  fact  that  the  act  to  regulate  com- 
merce forbade  the  companies  from  instituting  adequate  measures 
in  the  nature  of  self-government  in  order  to  restore  the  orderly 
conduct  of  the  American  railroad  system. 

3.  There  are  influences  more  potential  in  the  determination  of 
rates  than  railroad  combinations  or  agreements  between  railroad 
managers.  I  refer,  first,  to  the  indirect  but  all  pervading  regula- 
tive influence  of  the  competition  of  soil  with  soil,  of  mine  with 
mine,  and  of  factory  with  factory  throughout  this  vast  and  rapidly 
developing  country  of  ours.  Then  there  is  another  force  more 
trenchant  and  more  coercive  as  a  regulative  influence  in  rate-mak- 
ing than  even  the  productive  industries  of  the  United  States.  I 
refer  to  the  competition  of  commercial  forces ;  the  competition 
between  commercial  cities  and  between  traders  throughout  this 
broad  land.  This  sort  of  competition  confronts  the  railroad  man- 
ager at  every  initial  point  of  trade.     Several  times  during  the  last 


THE  AMERICAN  RAILWAY  SYSTEM.  169 

fifteen  years  it  has  gained  absolute  mastery  of  the  situation  and 
the  result  has  been  in  each  case  innumerable  unjust  discrimina- 
tions and  outrageous  disorder,  paralyzing  to  all  the  interests  of 
productive  enterprise,  of  transportation,  and  of  trade. 

The  chief  difficulty  of  the  present  day  is  not  so  much  how  to 
regulate  the  railroads  as  how  to  regulate  the  various  regulative 
influences  which  determine  rates.  It  is  the  excess  and  the  unre- 
strained power  of  regulative  influences  which  cause  the  most  se- 
rious troubles. 


THE  DEVELOPA\ENT  OE  RAILWAY  EREIGHT 
CLASSIEICATIONS. 

By  Mr.  C.  C.  McCain, 

Auditor,  Interstate  Commerce  Commission. 

From  the  inception  of  the  business  of  transportion  by  rail,  arti- 
cles of  an  analogous  character  have  been  grouped  for  the  purpose 
of  imposing  freight  charges. 

It  was  at  the  outset  perceived  that  to  provide  each  article  with 
a  distinct  rate  would,  owing  to  their  great  variety  and  number, 
render  any  system  of  tariff-making  burdensome  and  unwieldy. 
A  more  convenient  and  businesslike  method  was  found  in  the 
grouping  plan.  Such  an  arrangement  greatly  facilitates  the  mak- 
ing of  rate  schedules,  as  it  permits  many  articles  to  be  rated  to- 
gether in  a  single  paragraph  by  specifying  the  rate  for  the  group 
or  class.  The  forms  of  publication  wherein  all  commodities  are 
enumerated  and  classified  are  now  widely  known  as  Freight  Classi- 
fications, and  are  employed  by  all  railroads. 

The  freight  traffic  of  the  United  States  is  conducted  under  two 
general  classes  of  schedules,  known  as  Commodity  Tariffs  and 
Class  Tariffs.  The  former  are  applicable  to  such  articles  as  grain, 
lumber,  coal,  live  stock,  oil,  etc.,  transported  between  sections  of 
the  country  where  these  articles  have  attained  a  commercial  and 
shipping  importance,  which  have  made  necessary  specific  rules 
for  their  transportation  differing  from  those  covering  classified 
traffic,  as  well  as  a  somewhat  lower  scale  of  rates  than  is  applica- 
ble to  the  latter. 

Class  tariffs  are  arranged  to  show  the  rates  of  the  respective 
classes  provided  by  the  freight  classifications.  These  cover  the 
great  majority  of  articles  carried  by  the  railways ;  and  altho'  com- 
modities similar  to  the  ones  above  mentioned  may  be  rated  inde- 
pendently of  the  classification,  they  are  amenable  to  many  of  its 
rules. 

The  absence  in  former  years  of  the  restraining  influence  of  the 
law  and  of  associations  gave  a  stimulus  to  the  energies  of  the  so- 
liciting departments  of  the  railways  and  brought  about  the  prac- 
tice of  keeping  shippers  well  informed  as  to  the  current  charges ; 

Reprinted  by  permission  from  The  Independent  of  June  i,  18Q3. 


DEVELOPMENT  OF  FREIGHT  CLASSIFICATIONS.  171 

this,  together  with  the  offering  of  special  inducements  to  secure 
traffic,  formed  the  principal  occupation  of  the  soliciting  agencies. 
Another  favorite  way  of  attracting  business  was  to  remove  articles 
from  the  classification  and  temporarily  provide  them  with  a  lower 
commodity  rate.  At  such  times  the  schedules  were  practically 
abandoned  and  served  the  public  no  useful  purpose.  Shippers 
immediately  fell  into  the  habit  of  ''shopping"  for  rates,  and  looked 
upon  the  published  schedules  as  documents  fraught  with  techni- 
calities and  especially  designed  for  the  guidance  of  agents  and  so- 
licitors. Freight  classifications  were  viewed  in  much  the  same 
light  and  regarded  as  simply  prescribing  certain  shipping  rules 
not  essential  to  the  ascertainment  of  freight  charges. 

In  the  last  few  years  this  condition  has  entirely  changed ;  at 
this  time  relatively  fewer  articles  are  rated  independently  of  the 
classification  than  ever  before  in  the  history  of  railroads.  As  now 
published  the  classifications  are  current  guides  to  the  shipping 
public,  and  are  indispensably  a  part  of  the  rate  schedules.  They 
are  arranged  in  an  enlarged  and  convenient  form,  wherein  may  be 
found  all  articles  of  commerce  described  in  every  probable  form 
of  shipment  and  classified  in  accordance  with  the  various  elements 
that  enter  into  the  determination  of  freight  charges. 

The  necessities  of  an  interchange  of  business  between  railways 
have  resulted  in  co-operation  and  agreements,  whereby  associ- 
ations have  been  given  authority  to  make  classifications  for  all  its 
members.  Under  these  arrangements  the  number  of  classifica- 
tions have  been  gradually  reduced  until  we  find  at  this  time  the 
entire  traffic  of  the  country  confined  to  three  classifications. 

It  is  a  leading  principle  in  the  construction  of  Freight  Classifi- 
cations that  the  whole  cost  of  the  railway  service  shall  be  appor- 
tioned among  all  articles  transported  upon  the  basis  of  the  relative 
value  of  the  article,  rather  than  upon  the  cost  of  carriage.  Under 
this  method  the  value  of  the  article  forms  the  most  important 
element  in  determining  what  it  shall  be  charged.  There  are  also 
numerous  other  considerations  which  must  not  be  overlooked  when 
a  classification  is  to  be  made.  For  example,  some  articles  are 
bulky,  others  easily  broken,  and  many  involve  special  risks  and 
are  difficult  to  handle:  the  elements  of  competition,  volume  of 
business  and  direction  of  movement  must  each  be  considered, 
and  quite  as  important  is  the  analogy  which  must  be  preserved 
between  articles  of  like  character  and  value. 

The  above  describes  the  general  basis  upon  which  classifica- 
tions are  constructed,  and  while  to  a  large  extent  controlling,  the 
classifications  are  in  a  great  measure  a  series  of  compromises, 
the  participants  of  which  are  not  alone  the  railroads,  but  also 
shippers  and  representatives  of  business  interests  throughout  the 
country,  who  are  all  the  time  afforded  an  opportunity  to  join  with 
the  railroads  in  the  determination  as  to  the  proper  classification  of 
articles  of  shipment  affecting  their  interests.     To  such  importance 


172 


DEVELOPMENT   OF  FREIGHT   CLASSIFICATIONS. 


has  this  feature  of  the  transportation  business  grown  that  there 
have  been  established  in  different  sections  of  the  country  officered 
bureaus  accessible  to  the  public,  where  claims  for  the  adjustment 
of  inequalities  in  the  classification  may  be  presented,  or  the  intro- 
duction of  new  articles  secured. 

The  commercial  and  transportation  interests  are  regarded  by 
the  carriers  as  identical,  and  great  care  is  taken  in  the  assignment 
of  articles  to  particular  classes  to  avoid  possible  injury  to  any  in- 
terest or  section.  These  principles  find  recognition  in  each  of  the 
three  leading  classifications  now  governing  the  freight  traffic  of  the 
United  States,  and  although  promulgated  in  varying  forms,  there 
is  observed  in  each  a  constant  tendency  in  the  direction  of  uni- 
formity. 

There  is  probably  no  branch  of  the  railway  service  in  which  the 
advancement  noted  has  resulted  so  beneficially  to  the  shipping 
public  as  that  arising  from  the  enlargement  and  expansion  of 
Freight  Classifications,  and  it  is  the  purpose  of  this  article  to  look 
into  the  extent  of  the  change^  which  have  taken  place  in  the  ex- 
isting classifications,  and  to  point  out  briefly  what  effect  this  de- 
velopment has  had  upon  the  freight  charges  to  the  public. 

The  three  classifications  referred  to  as  now  governing  through- 
out the  United  States  are,  the  "Official,"  the  "Western,"  and  the 
"Southern."     The  sections  governed  by  each  are  as  follows: 

For  the  "Official":  east  of  the  Mississippi  River  and  Chicago, 
and  north  of  the  Ohio  and  Potomac  Rivers  to  the  Atlantic  Sea- 
board. 

For  the  "Western  ":  west  of  the  Mississippi  River  and  Chicago. 

For  the  "Southern":  south  of  the  Potomac  and  Ohio  Rivers, 
and  east  of  the  Mississippi  River. 

Prior  to  the  date  the  Act  to  regulate  commerce  became  effective 
— viz.,  April  4th,  1887 — there  were  numerous  classifications  in  the 
territories  described.  A  distinction  was  made  between  competi- 
tive and  local  traffic,  as  well  as  the  traffic  moving  in  opposite  di- 
rections, and  the  laws  of  various  States  made  necessary  to  sepa- 
rate classification  for  business  passing  between  points  in  such 
States.  The  rates  under  these  were  found  in  many  instances  to 
be  at  variance  with  the  requirements  of  the  new  national  law,  and 
a  very  general  revision  of  classification  and  rates  became  neces- 
sary. The  territory  described  as  covered  by  the  "Official"  will 
be  recognized  as  the  largest  in  point  of  tonnage  and  communities 
served.  It  has  been  stated  that  prior  to  April  ist,  1887,  one 
hundred  and  thirty- one  railroads  within  this  territory  had,  to  some 
extent,  separate  classifications.  These  grew  up  from  local  condi- 
tions, and  were  believed  to  be  generally  satisfactory  to  both  the 
carriers  and  the  public.  In  addition  there  were  five  associations 
of  railroad  companies,  each  having  its  own  classification,  applica- 
ble mainly  to  through  traffic,  and  in  many  instances  to  local 
traffic. 


DEVELOPMENT  OF  FREIGHT  CLASSIFICATIONS.  173 

Recognizing  that  the  continuance  of  these  separate  classifica- 
tions would  have  made  it  impossible  to  conform  to  either  the  letter 
or  spirit  of  the  act  to  regulate  commerce,  a  consolidation  was  ef- 
fected by  the  railroads,  by  which  the  classifications  of  the  several 
associations,  as  well  as  the  many  local  classifications,  were  brought 
together  under  what  has  since  been  known  as  the  *' Official." 
This  classification,  it  is  estimated,  is  now  applied  to  over  50  per 
cent  of  the  traffic  of  the  United  States.  At  about  the  same  time 
the  application  of  the  "  Western  "  was  enlarged  to  absorb  numer- 
ous local  classifications  west  of  the  Mississippi  river,  and  also 
throughout  the  South  many  local  and  state  classifications  were 
made  to  conform  to  the  "Southern." 

In  1886  the  classification  applicable  to  traffic  from  Atlantic  sea- 
board cities  to  western  competitive  points  provided  for  about 
1,000  descriptions  of  articles.  The  division  of  these  as  between 
carload  and  less-than-carload  quantities  is  strongly  suggestive  of 
the  magnitude  and  character  of  the  business  at  that  time.  For 
85  per  cent  of  the  number  of  articles  classified  no  distinction  in 
rating  was  made  between  less-than-carload  and  carload  quantities ; 
both  forms  of  shipment  were  rated  alike,  and  only  1 5  per  cent  was 
given  a  lower  rate  when  in  carload  amounts.  While  many  articles 
provided  with  a  classification  for  less-than-carload  quantities  only 
were  often  shipped  by  the  carload,  the  failure  on  the  part  of  the 
carriers  to  provide  such  commodities  with  a  distinct  carload  rate 
may  be  taken  as  indicating  to  some  extent  the  commercial  neces- 
sities of  that  period. 

The  distribution  among  the  several  classes  shows  a  preponder- 
ance of  assignment  to  the  higher  classes,  70  per  cent  representing 
the  proportion  then  in  the  first  three  classes,  and  30  per  cent  in 
the  remaining  or  lower  classes.  The  latter  figure,  it  will  be 
noticed,  is  double  the  proportion  given  the  carload  rating,  from 
which  it  might  be  understood  that  all  of  the  carload  classifications 
were  charged  the  rates  of  the  lower  classes.  This,  however,  was 
not  the  case,  and  many  articles  for  which  a  carload  provision  was 
made  were  found  in  the  higher  classes.  Few  advantages  are  de- 
rived by  shippers  of  carload  quantities  when  no  distinction  is 
made  in  the  rate  charged  on  account  of  quantity. 

The  Consolidated,  or  new  "Official  "  of  April  ist,  1887,  materi- 
ally changed  these  conditions.  Instead  of  1,000  descriptions, 
2,800  were  now  enumerated.  Regarding  the  increase  in  the  num- 
ber of  descriptions,  it  should  be  understood  that  this  does  not  im- 
ply an  addition  of  new  commodities  solely,  but  that  it  is  due 
mainly  to  extending  the  application  to  cover  the  different  forms 
of  packages  of  articles  which  are  found  already  classified  in  some 
form  or  other  under  the  classifications  now  absorbed.  Wherever 
these  extensions  have  been  made  it  has  been  noticed  that  a  lower 
classification  and  consequently  a  lower  rating  has  followed  the  one 
or  more  forms  in -which  the  articles  affected  are  carried.     New 


174  DEVELOPMENT  OF  FREIGHT  CLASSIFICATIONS. 

articles  are  continually  being  added,  and  the  classifications  are  in 
other  ways  enlarged  to  provide  a  separate  rating  for  each  of  the 
various  forms  in  which  articles  may  be  offered  for  shipment. 

Of  the  2,800  descriptions  55  per  cent  covered  less  than  carload 
shipments,  and  45  per  cent  received  lower  rates  when  in  carload 
quantities.  An  increase  of  30  per  cent  is  here  shown  in  the  num- 
ber of  descriptions  of  articles  which  received  a  carload  rating. 

Under  the  new  classification  of  April  ist,  1887,  we  also  find  the 
distribution  among  the  classes  to  show  an  increasing  proportion 
in  the  lower  classes  with  a  corresponding  decline  in  the  higher 
classes.  These  are  the  results  of  the  first  "  Official."  This  issue 
was  largely  experimental,  and  it  was  not  anticipated  that  the  com- 
merce of  so  large  an  area  could  at  once  be  made  to  conform  to  the 
new  conditions  resulting  from  the  consolidation  of  the  widely  dif- 
fering classifications  formerly  in  use.  A  pronounced  opposition 
was  manifested  by  shippers  to  the  new  order  of  affairs,  and  the 
carriers  were  immediately  in  receipt  of  numerous  protests  and  ap- 
plications for  changes,  and  a  revision  of  the  classification  at  once 
followed,  resulting  in  the  publication,  in  July  1887,  of  "Official" 
No.  2.  Further  revisions  have  been  made  necessary  by  the  con- 
stantly changing  conditions,  and  we  have  today  the  eleventh 
edition  of  this  classification,  dated  January  2d,  1893.  This  is  un- 
doubtedly the  most  elaborate  classification  ever  made,  and  it  is 
difficult  to  contemplate  what  further  development  may  be  made 
in  this  direction.  The  present  issue  contains  a  most  complete  list 
of  the  articles  of  commerce,  enumerated  in  every  form  of  package, 
and  by  it  shippers  may  readily  ascertain  the  class  under  which  ar- 
ticles are  rated. 

Five  thousand  six  hundred  and  thirty-four  descriptions  are  given 
in  the  present  classification,  or  about  double  the  number  of  the 
first  issue.  Of  these,  2,100,  or  38  per  cent,  are  for  shipments  in 
quantities  less  than  carloads  for  which  no  lower  rating  is  given 
when  in  carloads;  3,105,  or  55  per  cent,  are  for  shipments  in  less 
than  carloads,  and  for  which  a  lower  rate  is  provided  when  in  car- 
loads ;  408,  or  7  per  cent,  are  exclusively  carload  classifications. 

All  of  these  are  distributed  into  six  classes,  53  per  cent  of  the 
total  appearing  in  the  first  three,  and  47  per  cent  in  the  lower 
classes.  By  these  figures  it  is  shown  that  the  total  number  of 
items  in  the  present  classification  exceed  by  4,600  the  number  in 
the  classifications  applying  from  the  seaboard  in  1886,  and  also 
that  the  proportion  classified  as  less  than  carloads  with  same  rat- 
ing for  carloads  has  decreased  from  85  per  cent  in  the  old  to  38 
per  cent  in  the  new,  while  the  proportion  classified  at  less  than 
carloads  with  a  lower  rating  when  in  carloads  has  increased  from 
15  per  cent  in  the  old  to  62  per  cent  in  the  new.  When  an  article 
is  provided  with  a  distinct  carload  classification  the  rate  is  invari- 
able lower  than  when  carried  in  less  than  carload  quantities ;  there- 
fore, when  the  number  receiving  a  carload  classification  is  in- 
creased such  increase  denotes  1  eductions  in  the  charges. 


DEVELOPMENT  OF  FREIGHT  CLASSIFICATIONS.  175 

No  adequate  presentation  of  these  results  can  be  made  without 
reference  to  the  rates  of  the  respective  classes.  The  principal 
competitive  rates  under  which  the  tariff  is  carried  from  the  sea- 
board to  western  points  have  remained  practically  the  same  since 
1886.  The  variation  from  classes  higher  than  fourth  class  to 
lower  classes  of  14  per  cent,  therefore,  indicates  a  lowering  in  the 
rates  of  the  articles  represented  by  this  proportion.  This  figure, 
however,  does  not  include  the  changes  from  first  to  second  class, 
second  to  third,  or  from  third  to  fourth,  of  which  there  have  been 
many.  The  tendency  downward  is  very  fully  presented  in  the 
following  comparison : 

1886.  1893. 

Total  number  of  descriptions 1,000  5,600 

Proportion  at  ist  class  75c.       32  per  ct.  V  22  per  ct.  ) 

"           "  2d      "     65c.       24    "    "   J-Gyperct.  12    "    "   J- 53  per  ct. 

"  3d      "     50c,       II     "    •'   )  19    "    "   ) 

"           *'  4th    "     35c.       31  per  ct.  )  19  per  ct.  ) 

"           "  5th    "     30c.         2    "    "   [•33perct.  23     "    "    Mvperct. 

"  6th    "     25c.         o    "    "    )  5     "    "    ) 
(Rates  used  are  from  New  York  to  Chicago.) 

More  explicitly  stated,  in  1886,  67  per  cent,  or  670  of  the  1,000 
articles  were  charged  50  cents  per  hundred  and  higher;  in  1893 
the  actual  number  is  shown  to  be  higher,  although  the  proportion 
at  the  rates  of  the  higher  classes  is  very  much  less.  The  number 
in  1886  charged  a  rate  of  35  cents  per  hundred  and  lower  was  only 
330,  or  33  per  cent;  in  1893  it  is  seen  that  this  number  is  increased 
to  2,630,  or  47  per  cent.  Another  form  of  comparison  shows  the 
average  rate  of  all  descriptions  in  1886  as  6;^  cents  against  48 
cents  in  1893,  or  a  reduction  of  15  cents  per  hundred  pounds. 

The  changes  in  the  proportions  of  traffic  carried  in  the  various 
classes  is  also  illustrative  of  the  operation  and  effect  of  the 
changes  in  the  classification.  For  the  purpose  of  presenting  the 
results  in  this  connection  the  business  from  New  York  to  Chicago 
may  be  taken  as  representative  of  the  general  movement  from  the 
East  to  the  West.  Previous  to  1886  no  considerable  number  of 
articles  were  permanently  assigned  to  the  fifth  and  sixth  classes ; 
these  classes  then  embraced  only  a  few  commodities  which  had 
been  given  a  special  rate.  At  that  time  the  fourth-class  rate  was 
on  the  basis  of  35  cents  per  hundred  pounds,  and  the  greater  por- 
tion of  the  lower-class  traffic  was  carried  in  the  fourth  class. 
Since  1887  we  find  the  tonnage  proportion  of  the  fourth  class 
very  greatly  reduced,  and  a  pronounced  increase  in  the  sixth 
class;  the  rate  of  the  latter  is  now  permanently  25  cents.  Over 
40  per  cent  of  the  total  traffic  is  now  carried  at  this  rate,  whereas 
prior  to  1886  the  proportion  at  the  same  rate  was  very  much  less. 

It  has  also  been  stated  that  47  per  cent  of  the  descriptions  in 
the  classification  now  applying  westward  from  the  seaboard  is 


176  DEVELOPMENT  OF  FREIGHT  CLASSIFICATIONS. 

found  in  the  fourth  and  lower  classes.  The  tonnage  of  these 
classes  from  New  York  is  60  per  cent  of  the  total  traffic,  the  great- 
er portion  of  which  now  receives  lower  rates  than  in  1S86. 

No  attempt  is  now  made  to  present  detailed  comparisons  of  the 
reductions  of  the  numerous  other  classifications  absorbed  by  the 
**OflBcial.**  The  business  from  the  seaboard  to  the  West  is  almost 
entirely  carried  under  that  classification,  and  the  results  of  the 
general  comparison  of  the  classifications  covering  this  business 
are  to  a  large  degree  representative  of  the  decline  which  has 
taken  place  throughout  the  territor}^  governed  by  the  Official 
Classification  since  1886.  The  fact  should  be  emphasized  that  the 
changes  in  the  rates  here  indicated  are  due  solely  to  the  lowering 
of  the  classification.  This  will  be  understood  when  it  is  recalled 
that  the  rates  proper  between  the  seaboard  and  the  Mississippi 
River  have  not  been  materially  changed. 

The  '^Official  "  Classification  is  also  now  applied  to  the  local  traf- 
fic of  most  of  the  carriers  east  of  the  Mississippi  River,  and  not  only 
have  important  reductions  been  effected  by  placing  commodities 
in  lower  classes  than  those  to  which  they  were  formerly  assigned, 
but  the  rates  of  the  different  classes  of  most  of  the  roads  in  the 
territory^  described  have  been  greatly  reduced. 

The  section  served  by  the  * 'Western"  Classification  extends 
over  a  vast  area  of  country  west  of  the  ^lississippi  River,  and  with 
the  exception  of  certain  Pacific  Coast  traffic,  is  now  generally  ap- 
plied to  all  freight  business  throughout  this  section,  and  as  at 
present  arranged  represents  a  consolidation  of  many  local  classi- 
fications formerly  in  use.  The  number  of  articles  specifically 
provided  for  is  not  as  great  as  found  in  the  "Official,"  but  it  is 
noticed  that  the  increase  is  nearly  as  large.  Three  thousand  six 
hundred  and  fifty-eight  descriptions  appear  in  the  present  ''Wes- 
tern." This  is  an  increase  of  over  two  thousand  since  1886.  Fifty- 
five  per  cent  of  the  whole  number  are  now  pro\'ided  with  separate 
and  lower  rates  when  in  carloads,  which  is  an  increase  of  1 5  per 
cent  since  18S6. 

The  tendency  to  lower  classification  is  also  observ^ed  in  the  dis- 
tribution among  the  classes ;  the  proportion  in  the  higher  classes 
is  now  much  less  than  formerly,  with  corresponding  addition  to 
the  lower  classes. 

These  figures  show  quite  forcibly  to  what  extent  the  **Western" 
is  expanding,  and  that  with  this  expansion  articles  are  rapidly 
finding  places  in  the  lower  classes. 

The  ''Southern"  presents  fewer  changes  of  the  character  here 
described  than  either  of  the  other  classifications,  yet  the  develop- 
ment in  this  respect  is  quite  remarkable  when  the  volume  of  busi- 
ness is  taken  into  consideration.  One  thousand  seven  hundred 
and  fifty-two  descriptions  are  now  given  in  the  "Southern"  Classi- 
fication, and  of  these  18  per  cent  are  pro\4ded  with  lower  rates  when 
in  carload  quantities  than  when  shipped  in  less  than  carloads. 


DEVELOPMENT  OF  FREIGHT  CLASSIFICATIONS.  177 

An  exhaustive  presentation  of  a  subject  as  important  as  this  is 
impossible  in  the  space  here  allotted  to  its  consideration.  In 
very  general  terms  only  has  the  extent  of  the  development  been 
shown,  yet  sufficient  is  given  clearly  to  present  the  benefits  which 
the  public  have  derived  from  the  consolidations  which  reduced 
the  number  of  classifications  governing  the  freight  traffic  of  this 
country  to  three,  the  subsequent  enlargement  of  these  to  meet 
the  demand  of  commercial  development,  and,  what  is  most  im- 
portant, the  lowering  of  freight  charges  resulting  from  each  of 
these  causes. 

The  freight  traffic  of  the  entire  country  will  doubtless  in  the 
near  future  be  conducted  under  one  or  a  uniform  classification. 
Pending  the  adoption  of  such  a  classification  further  progress  in 
the  line  here  indicated  may  be  expected  in  each  of  the  principal 
classifications  now  in  use.  It  may  also  be  reasonably  expected 
that  the  charges  for  railway  transportation  will  keep  pace  with 
the  constant  tendency  to  lower  values  and  prices  observed  for  the 
great  majority  of  articles  of  commerce,  and  freight  classifications 
will  be  largely  the  medium  through  which  such  results  will  be 
accomplished. 

Washington,  D.  C. 

12 


THE  INTERSTATE  COMMERCE  LAW. 

Hon.  Charles  Francis  Adams ^  Jr. 

You  have  asked  me,  as  the  representative  of  one  of  the  large 
railroad  systems  of  the  country,  to  express  my  views  this  evening 
on  the  subject  of  the  interstate  commerce  act  and  its  practical 
working,  as  seen  through  the  experience  of  the  last  two  years. 
Just  now  we  hear,  especially  in  financial  and  railroad  circles,  loud 
denunciation  of  this  law.  It  is  constantly  referred  to  as  the  pro- 
lific source  to  which  all  the  evils  under  which  the  railroad  system 
is  now  suffering  can  be  traced.  For  reasons  which  I  shall  pres- 
ently state,  I  do  not  regard  the  interstate  commerce  act  as  in  all 
respects  a  well-considered  or  a  beneficent  law.  I  am  very  sure 
that  it  has  not  produced  the  good  results  which  were  hoped  from 
it ;  but  yet  I  see  no  good  reason  for  referring  to  it  in  the  way  so  com- 
mon of  late. 

•  That  the  general  railroad  situation  of  the  country  is  at  pres- 
ent unsatisfactory  is  apparent.  Stockholders  are  complaining; 
directors  are  bewildered ;  bankers  are  frightened.  Yet  that  the 
interstate  commerce  act  is  in  the  main  responsible  for  all  these  re- 
sults, remains  to  be  proved.  In  my  opinion,  the  difficulty  is  far 
more  deep-seated  and  radical.  In  plain  words,  it  does  not  lie  in 
any  act  of  legislation,  state  or  national;  and  it  does  lie  in  the 
covetousness,  want  of  good  faith,  and  low  moral  tone  of  those  in 
whose  hands  the  management  of  the  railroad  system  now  is ; — in 
a  word,  in  the  absence  among  them  of  any  high  standard  of  com- 
mercial honor. 

These  are  strong  words,  and  yet,  as  the  result  of  a  personal  ex- 
perience stretching  over  twenty  years,  I  make  bold  to  say  that 
they  are  not  so  strong  as  the  occasion  would  justify.  The  rail- 
road system  of  this  country,  especially  of  the  region  west  of 
Chicago,  is  today  managed  on  principles  which — unless  a  change 
of  heart  occurs,  and  that  soon — must  inevitably  lead  to  financial 
disaster  of  the  most  serious  kind.  There  is  among  the  lines  com- 
posing that  system  an  utter  disregard  of  those  fundamental  ideas 
of  truth,  fair  play  and  fair  dealing,  which  lie  at  the  foundation  not 
only  of  the  Christian  faith,  but  of  civilization  itself.     With  them 


Reprinted  by  permission  from  the  Railway  Review  of  December  29,  1888. 


THE  INTERSTATE  COMMERCE  LAW.  jyg 

there  is  but  one  rule, — that,  many  years  a8;-o,  put  by  Wordsworth 
into  the  mouth  of  Rob  Roy : — 

"The  simple  rule,  the  good  old  plan, 
That  he  shall  take  who  has  the  power, 
And  he  shall  keep  who  can." 

The  state  of  things  in  this  respect  was  bad  enough  before  the 
passage  of  the  interstate  commerce  act,  but  the  operation  of  that 
act  has  gradually  aggravated  what  was  bad  enough  already. 
Since  that  act  went  into  effect  two  years  ago,  there  has  been  what 
might  be  called  a  craze  for  railroad  construction.  Great  corpora- 
tions, one  after  the  other,  have  contracted  the  madness,  and  have 
built  hundreds  of  miles  of  road,  almost  paralleling  each  other.  In 
many  cases  they  have  actually  paralleled  each  other  across  wide 
tracts  of  country  in  which  no  human  being  lived.  This  is  true 
in  Wisconsin,  in  Minnesota,  in  Nebraska,  in  Kansas.  Only  a 
day  or  two  since,  some  citizens  of  .the  west  called  upon  me,  and 
wanted  a  branch  of  the  Union  Pacific  built.  I  examined  the  map, 
and  found  that  there  was  already  a  railroad  between  the  two 
points  named.  They  wanted  us  to  build  a  parallel  road  a  short 
distance  from  it.  I  suggested  to  them  ironically  that  it  would  be 
better  for  us  to  build  on  the  right  of  way  of  the  other  road,  so  as 
to  make  what  would  practically  be  one  double-track  road.  To  my 
surprise,  they  were  so  accustomed  to  railroad  follies  that  the  irony 
of  the  proposition  did  not  suggest  itself  to  them.  They  remarked, 
with  all  possible  gravity,  that  this  would  be  altogether  the  best 
way  of  doing  the  thing.  They  simply  wanted  a  competing  road, 
built  by  eastern  capital,  alongside  of  another  road  already  built, 
also  by  eastern  capital. 

The  construction  of  all  these  miles  of  railroad,  for  which  hardly 
any  immediate  demand  existed,  made  a  readjustment  of  traffic 
necessary.  That  is,  the  moment  the  roads  were  finished,  the 
problem  passed  out  of  the  hands  of  the  engineer  into  the  hands 
of  the  freight  agent,  by  whom  traffic  of  some  sort  for  the  new 
roads  had  to  be  provided.  The  interstate  commerce  act  was  in 
operation.  It  was  impossible  to  pool,  and  the  long  haul  regulated 
the  short  haul.  Then  followed  a  depth  of  railroad  morals  among 
freight  agents  lower  than  had  even  previously  existed, — and  that 
is  saying  much.  The  dishonest  methods  of  rate-cutting,  the  se- 
cret systems  of  rebates,  the  indirect  and  hidden  payments  made 
to  influence  the  course  of  traffic,  resorted  to  or  devisd  during  the 
last  two  years,  I  do  not  hesitate  to  say  are  unprecedented  in  the 
whole  bad  record  of  the  past.  In  this  respecf,  I  endorse  every 
word  of  indignant  denunciation  which  Judge  Cooley,  of  the  Inter- 
state Commerce  Commission,  is  reported  to  have  recently  uttered. 
Names  of  members  or  employes  of  firms  whose  business  it  was 
desirable  to  secure,  but  to  whom  it  was  unlawful  openly  to  allow 
a  rebate,  have  been  put  upon  the  pay-rolls  of  companies  at  sala- 
ries equal  to  the  estimated  amount  of  what  the  rebate  would  have 


i8o  THE  INTERSTATE  COMMERCE  LAW. 

been;  where  the  influence  of  a  particular  person  was  thought 
necessary  to  secure  certain  shipments,  he  has  been  advised  that 
the  company  wished  to  consult  him,  but,  in  order  that  it  might  do 
so  more  conveniently  he  must  live  in  a  house  in  a  certain  quarter, 
-^and  the  rent  of  that  house  has  been  paid  by  the  company ;  where 
it  was  thought  expedient  to  cut  the  rate  on  passenger  tickets  to  a 
given  point  without  affecting  the  rates  to  intermediate  points  under 
the  interstate  commerce  act,  tickets  to  that  point  have  been  placed 
by  the  hundreds  in  the  hands  of  "scalpers,"  and  they  were  al- 
lowed a  commission  equal  to  half  the  price  of  the  ticket.  This 
commission,  the  allowance  of  which  the  act  did  not  specifically  for- 
bid, the  "  scalper  "  again  shared  with  the  purchasers  of  the  tickets. 

It  will  be  asked  why  the  penalties  of  the  interstate  commerce 
act  are  not  enforced  against  those  who  thus  directly  and  indirectly 
evade  its  provisions.  The  question  may  be  asked  of  nie, — Why 
do  you  not  give  information,  a,nd  institute  proceedings  under  the 
law  ?  I  merely  say,  in  reply,  that,  apart  from  a  prejudice  against 
being  an  informer,  while  I  am  morally  sure  that  these  things  are 
done,  I  cannot  furnish  legal  proof  of  them.  My  information  comes 
indirectly  or  at  second  hand ;  and,  while  I  have  no  doubt  myself  of 
its  accuracy,  yet  if  I  were  brought  to  book  as  to  time  and  place 
and  circumstance,  I  could  not  give  them.  The  thousand  evasions 
of  the  interstate  commerce  act  cannot  be  proved  in  coiirt.  Yet, 
among  us  railroad  men,  the  fact  that  these  things  are  done  is  no- 
torious. It  is  all  part  and  parcel  of  that  sneak -thief  and  pick- 
pocket method  of  doing  business  which  has  become  a  second  na- 
ture in  certain  grades  of  the  railroad  service. 

The  community,  and  least  of  all  the  railroad  community,  should 
not,  therefore,  either  be  deceived  or  deceive  themselves.  It  is 
this  absence  of  good  faith,  this  greed  of  acquisition,  this  turning 
over  of  business  to  subordinates  to  hack  away  at  each  other  at  the 
expense  of  the  stockholders,  which  has  brought  the  railroad  sys- 
tem to  its  present  low  condition,  and  threatens  to  carry  it  still 
lower.  To  attribute  it  to  the  interstate  commerce  act  is  an  utter 
mistake.  If  that  act  were  totally  repealed  to-morrow,  it  would 
produce  but  a  temporary  and  stock-jobbing  relief.  For  a  few  days 
things  might  be  apparently  better;  but  they  would  be  sure  to 
drop  heavily  back  again  into  their  present  bad  estate,  unless  the 
knife  of  reform  went  deeper  and  cut  at  the  root  of  the  evils  I  have 
referred  to.  The  railroad  system  must  heal  itself ;  no  act  of  Con- 
gress, or  repeal  of  any  act  of  Congress,  will  greatly  help  it. 

But  in  saying  what  I  have  said,  I  do  not  mean  to  imply  that  in 
my  judgment  the  interstate  commerce  act  is  a  harmless,  much  less 
a  useful,  piece  of  legislation.  On  the  contrary,  I  am  very  sure 
that,  as  it  stands,  it  is  not.  It  has  been  in  operation  two  years, 
and  we  now  begin  to  feel  its  effect,  and  be  able  to  forecast  its  re- 
sults. And  both  its  present  effect  and  its  future  results  are  exactly 
those  which  its  framers  never  contemplated,  and  from  which,  if 


J 


THE  INTERSTATE  COMMERCE  LAW.  i8i 

they  realized  them  as  we  do,  they  would  recoil.  The  process  of 
gravitation  and  consolidation,  so  far  as  the  railroads  are  concerned, 
was  going  on  fast  enough  before,  but  the  interstate  commerce  act 
has  given  it  a  new  impetus.  It  has  done  this  through  a  process 
which  is  unmistakable  to  all  who  make  a  study  of  the  subject. 
The  practice  known  as  pooling,  which  the  interstate  commerce 
act  inhibits,  was  merely  a  method  through  which  the  weaker  rail- 
road corporations  were  kept  alive.  To  prevent  excessive  and  un- 
equal competition,  business  was  so  divided  that  the  less  favored 
corporation  had  some  share  of  traffic  assigned  to  it.  This  prac- 
tice the  law  put  a  stop  to ;  and  it  further  enacted  that  rates  to 
competing  points  should  not  be  less  than  rates  to  intermediate 
points. 

These  enactments  struck  at  the  very  foundation  of  the  business 
system  under  which  the  railroads  in  the  country,  and  the  country 
itself  had  been  built  up,  and  it  took  some  time  for  them  to  pro- 
duce their  results.  They  have  of  late  been  doing  so.  Under  the 
operation  of  the  act,  the  smaller  local  railroads  throughout  the 
country  are  being  ground  out  of  existence.  It  is  the  long  haul 
which  brings  in  the  profit.  The  smaller  independent  railroads 
cannot  have  the  long  haul,  and  can  only  be  operated  profitably  in 
connection  with  the  larger  railroads.  They  are  thus,  one  by  one, 
becoming  unrenumerative,  and  being  forced,  whether  they  like  it 
or  not,  into  the  maws  of  the  few  great  systems  into  which  the  rail- 
roads of  the  country  are  rapidly  crystalizing. 

So  much  for  the  practical  working  of  a  law  inhibiting  pooling. 
Next  came  the  long  and  short  haul  clause.  Just  as  the  small,  lo- 
cal railroads  are  crushed  out  of  existence  by  the  anti-pooling 
clause,  so  the  local  points  of  distribution  and  second-class  centers 
throughout  the  country  find  themselves,  because  of  the  long  and 
short  haul  clause,  unable  to  compete  with  the  great  commercial 
centers.  Traffic,  under  the  provisions  of  the  act,  must  invariably 
seek  the  railroad  having  the  long  haul  to  the  most  distant  and 
largest  center.  The  operation  of  the  law  in  this  respect  is  now 
beginning  to  make  itself  felt  upon  the  smaller  distributing  points. 
They  are  deprived  of  their  markets,  for  those  who  formerly  bought 
of  them  can  get  the  same  goods  on  better  terms  from  the  larger 
and  more  distant  centers.  The  old  local  system  of  distribution  is 
broken  up  in  favor  of  the  centralized  system.  This  fact  is  now 
making  itself  apparent  to  the  manufacturers  and  jobbers  of  the 
smaller  cities  or  towns  as  against  Chicago,  St.  Louis,  or  Cincin- 
nati ; — but  as  sure  as  the  law  of  gravitation  applies  to  all  places  and 
works  under  all  circumstances,  this  same  long  and  short  haul 
clause  will  next  make  itself  felt  against  Chicago,  St.  Louis,  and 
Cincinnati,  and  in  favor  of  New  York.  In  other  words,  contrary 
to  every  design  of  those  who  framed  the  act,  its  provisions  have 
lent  a  new  impetus  to  just  those  forces  which  it  was  intended  to 
hold  in  check.     Instead  of  building  up  the  local  road  and  the  small 


1 82  THE  INTERSTATE  COMMERCE  LAW. 

distributing  center,  it  is  working-  the  sure  destruction  of  both.  An 
artificial,  but  most  powerful  impetus  has  thus  been  given  to  the 
process  of  centralization.  With  the  body  politic,  as  with  the  hu- 
man body,  a  mistaken  remedy  only  aggravates  the  disease.  The 
remedy  in  this  case  was  a  mistaken  one,  and  the  danger  now  is 
lest,  seeing  the  disease  aggravated,  the  physician  should  conclude 
that  he  had  fallen  into  the  vulgar  error  of  not  giving  enough  of 
his  sure-cure  remedy,  and  so  proceed  to  double  the  dose.  It  is 
not  another  dose  of  the  same  treatment,  but  a  wholly  different 
treatment  which  is  required. 

Under  these  circumstances,  it  may  perhaps  be  asked  what  my 
view  of  the  future  is,  and  what  should  now  be  done.  While  I  do 
not  care  to  set  up  as  a  prophet,  the  trend  of  events  seem  to  me 
plain  enough ;  nor  do  I  believe  that  any  act  of  Congress  or  of 
state  legislatures  can  thwart  or  greatly  change  it.  The  railroads 
of  this  country  are  moving  rapidly  towards  some  great  system  of 
consolidation.  I  do  not  know  when  or  how  it  will  come  about; 
nor  is  it  necessary  now  to  consider  this.  Neither  do  I  believe  it 
will  prove  an  evil  when  it  does  come.  Nevertheless,  it  is  a  matter 
of  common  notoriety  that  such  a  result  is  viewed  with  grave, 
popular  apprehension.  We  have  seen  what  the  progress  of  the 
last  twenty  years  has  been  in  this  respect.  Crystallization  has 
gone  on  during  those  years,  so  that,  while  then  a  railroad  of  200 
or  300  miles  was  considered  large,  one  of  5,000  or  6,000  miles  is 
now  far  from  being  the  largest.  As  I  have  pointed  out,  the  move- 
ment is  today  going  forward  more  rapidly,  much  more  rapidly, 
under  the  artificial  impetus  given  to  it  by  the  interstate  commerce 
act,  than  ever  before.  The  next  move  will  be  in  the  direction  of 
railroad  systems  of  20,000  miles  each,  under  one  common  manage- 
ment. The  interstate  commerce  act,  acting  on  the  tendency  of 
natural  forces,  is  at  this  moment  rapidly  driving  us  forward  to- 
wards some  grand  railroad  trust  scheme.  Even  this,  from  my 
point  of  view,  I  cannot  regard  as  a  thing  to  be  dreaded.  I  am 
very  sure  now,  as  I  have  been  for  the  last  twenty  years,  and  as  I 
long  ago  expressed  myself,  that  a  great  consolidated  corporation, 
or  even  trust,  can  be  held  to  a  far  stricter  responsibility  to  the  law 
than  numerous  smaller  and  conflicting  corporations.  Under  the 
existing  system  no  one  can  be  held  to  account.  Evasion  is  always 
possible,  and  invariably  it  is  "the  other  man  "  who  is  responsible 
for  the  wickedness.  With  one  large  corporation  or  trust,  it  would 
be  otherwise.  Both  law  and  popular  opinion  could,  and  certainly 
would,  be  directed  against  it. 

The  course  of  events,  so  far  as  next  week  is  concerned,  seems 
to  me,  therefore,  sufficiently  apparent.  Neither,  I  say  once  more, 
can  I  see  anything  in  it  which  should  cause  public  or  private 
anxiety.  The  doubt  in  my  mind  exists  as  to  what  is  going  to 
happen  between  now  and  next  week ;  what  will  take  place  tomor- 
row.    Events  are  moving  altogether  too  fast,  even  for  our  times. 


THE  INTERSTATE  COMMERCE  LAW. 


183 


I  would,  therefore,  like  to  see  the  interstate  commerce  act  amend- 
ed as  respects  the  pooling  provision  and  the  long  and  short  haul 
clause,  simply  as  a  method  of  putting  on  the  brakes.  The  time  is 
not  ripe  for  what  is  impending.  They  are  talking  of  trusts  and 
consolidations  to  be  effected  tomorrow,  when  it  seems  to  me  that 
in  the  natural  order  of  events  they  would  not  take  place  until  next 
week.  An  amendment  of  the  interstate  commerce  act  in  the  two 
respects  I  have  indicated  would,  in  my  judgment,  tend  to  delay 
this  progress  of  events.  It  would  not,  it  is  true,  touch  those  rad- 
ical evils  in  the  railroad  organization — that  absence  of  faith,  that 
insatiable  greed,  that  low  sense  of  commercial  honor — of  which  I 
have  spoken.  These  can  only  be  cured  in  one  way.  That  one 
wav  is,  by  placing  responsibility  on  individuals. 

It  is  for  this  reason  that  I  could  not  the  other  day  but  regret  the 
signs  of  public  disapproval  with  which  a  scheme  for  a  railroad 
clearing  house  in  the  west  was  met.  It  was  at  once  characterized 
in  the  papers  as  a  vast  "trust" — in  these  days  everything  is  a 
* 'trust" — and  denounced  as  a  conspiracy.  It  was  nothing  of  the 
sort.  There  was  not  a  feature  of  what  is  known  as  a  trust  in  the 
scheme — hardly  a  feature  of  a  pool.  On  the  contrary,  a  well-de- 
vised railroad  clearing  house  scheme  would  prove  in  practice, 
whether  so  intended  or  not,  in  the  direct  line  of  the  enforcement 
of  the  interstate  commerce  act  in  all  its  better  features,  and  it  has 
many  such.  That  rates  can  in  these  days  and  this  country  be 
more  than  reasonable,  I  do  believe.  A  reasonable  system  of  rail- 
road rates,  publicly  announced,  equal  to  all  and  honestly  main- 
tained, is  the  commercial  need  of  the  day ;  and  not  less  so  for  the 
communities  of  business  men  than  for  the  railroads  themselves. 
This  was  one  of  the  results  which  it  was  hoped  the  interstate  com- 
merce act  would  bring  about  when,  two  years  ago,  it  went  into 
effect.  In  practice  it  has  only  aggravated  the  evils  it  was  intended 
to  remedy.  In  my  belief,  it  cannot  produce  any  other  result  until 
the  railroads  themselves  co-operate  with  the  act ;  and  they  cannot 
co-operate  until  they  are  brought  together  in  one  responsible  or- 
ganization to  enforce  its  provisions.  There  must  be  some  one 
somewhere  to  whom  public  opinion  can  look ;  and  then,  when  the 
abuses  to  which  I  have  referred  are  committed,  the  finger  of  pub- 
lic opinion  will  assuredly  point  to  the  responsible  man. 

For  myself,  and  on  behalf  of  the  company  of  which  I  am  the 
responsible  head,  I  will  say  that  to-day,  and  so  long  as  it  stands  on 
the  statute  book,  we  would  welcome  the  rigid  and  literal  enforce- 
ment of  every  provision  of  the  interstate  commerce  act.  It  is 
either  a  good  law  or  a  bad  law.  If  it  is  a  good  law,  it  should  be 
obligatory  on  all  alike,  the  sneak-thief  and  the  pickpocket  as  well 
as  the  law-abiding  citizen ;  it  should  no  longer  be  a  cover  under 
which  the  former  ply  their  vocation  undisturbed,  to  the  extreme 
detriment  of  the  latter.  If  it  is  not  a  good  law,  we  believe  in 
General  Grant's  aphorism,  that  the  proper  way  to  repeal  a  bad 


1 84  THE  INTERSTATE  COMMERCE  LAW. 

law  is  to  execute  it ;  and  we  would  have  every  provision  of  this 
law  rigidly  enforced,  to  the  end  that  it  might  produce  its  natural 
results  with  a  view  to  amendment  or  repeal. 

If,  therefore,  I  were  asked  this  evening  for  concrete  proposi- 
tions embodying  the  measures  most  likely  to  work  an  important 
and  desirable  reform  in  the  railroad  situation,  I  would  say, — delay 
at  least  for  a  time,  the  present  too  rapid  tendency  towards  crys- 
tallization or  consolidation,  by  repealing  the  features  of  the  inter- 
state commerce  act  which  are  precipitating  events  in  that  direc- 
tion. If  the  anti-pooling  provisions  of  the  act  may  not  be  wholly 
repealed,  let  them,  at  least,  be  so  modified  that  contracts  m.ade 
among  railroads,  subject  to  the  approval  of  the  Interstate  Com- 
merce Commission,  for  the  division  of  competitive  traffic  at  rea- 
sonable rates,  may  be  binding  in  law.  Then,  more  and  most  of  all, 
encourage  and  facilitate  any  movement  among  those  interested 
which  will  tend  to  raise  the  standard  of  commercial  morality  in  rail- 
road circles ;  and  be  assured,  nothing  will  tend  more  directly  and 
immediately  to  that  result  than  the  organization  of  the  railroads 
into  some  public  and  recognized  clearing-house  system  through 
which  the  traffic  management  of  the  country  can  be  taken  out  of 
the  hands  of  irresponsible  subordinates  who  now  so  vilely  abuse 
it,  and  restored  to  those  who  should  be  responsible,  in  fact  as  well 
as  in  name,  for  the  companies  of  which  they  are  the  heads. 

This  I  hold  to  be  the  work  of  to-day.  That  the  material  and 
scientific  development  which  is  hurrying  us  forward  towards 
greater  centralization  can  be  paralyzed  or  set  at  nought  by  act  of 
Congress,  I  do  not  for  an  instant  believe.  But  it  is  not  wise  to 
look  too  far  into  the  future,  for  it  is  the  tmexpected  which  is  apt 
to  occur.  The  work  of  the  present  is  clear,  and  it  is  enough ;  and 
the  work  of  the  present  should,  in  my  judgment,  be  to  retard 
rather  than  to  accelerate  the  tendencies  to  which  I  have  referred 
on  the  one  hand,  and  to  create  a  higher  standard  of  railroad  honor 
through  organization  and  individual  responsibility  on  the  other. 
The  law  and  the  influences  now  at  work  are  doing  neither  the  one 
nor  the  other. 


DISCRIMINATION  BY  RAILWAYS. 

By  Hon.  Martin  A.  Knapp^ 

Interstate  Commerce  Commissioner. 

The  relation  of  the  railroads  to  the  people  is  the  most  vital  sub- 
ject of  public  concern.  The  agencies  by  which  the  diversified 
products  of  industry  are  distributed  over  the  vast  areas  of  our 
country,  and  by  which  its  immense  population  may  travel,  with 
surprising  speed,  comfort  and  safety,  in  every  direction  and  from 
one  end  of  the  land  to  the  other,  are  not  only  the  greatest  achieve- 
ment of  this  generation  but  have  the  most  potent  bearing  upon 
individual  welfare.  The  more  thoughtfully  we  study  the  problem 
of  personal  opportunity,  the  more  deeply  are  we  impressed  with 
its  increasing  dependence  upon  just  and  equal  charges  for  public 
transportation.  Whatever,  therefore,  affects  in  any  material  de- 
gree the  management,  facilities  or  cost  of  using  these  necessary 
highways,  must  be  of  special  consequence  to  every  person. 

The  advent  of  railroads  is  so  recent,  their  expansion  has  been 
so  rapid  and  their  stimulus  to  every  form  of  enterprise  so  extraor- 
dinary, that  in  the  contemplation  of  their  surpassing  benefits 
the  evils  of  unjust  rates  and  unequal  treatment  are  frequently 
overlooked.  The  difficult  conditions  with  which  legislation  has 
lately  undertaken  to  deal  were  the  necessary  result  of  excessive 
construction  and  unregulated  management  in  the  two  feverish 
decades  which  followed  the  Civil  War.  In  many  sections  of  the 
country  this  was  a  period  of  visionary  schemes  and  rash  specula- 
tion. The  eager  clamor  of  the  people  for  the  facilities  of  rail  con- 
veyance incited  numerous  projects  which  were  doomed  to  financial 
failure.  In  the  reckless  haste  to  secure  railroad  transportation,  an 
unwarranted  premium  was  offered  to  those  who  would  furnish  it. 

Enormous  grants  of  public  lands,  donations  of  private  property 
and  endless  obligations  in  the  form  of  county,  town  and  munici- 
pal bonds  were  freely  and  often  inconsiderately  given  to  aid  the 
extension  of  railway  lines  into  remote  districts  and  undeveloped 
regions.  The  recently  settled  lands  were  heavily  mortgaged, 
and  the  future  discounted  without  reserve  to  gratify  the  passion 
for  these  public  highways.     They  were  built  in  many  instances 

Reprinted  by  permission  from  The  Independent  of  June  i,  1893. 


1 86  DISCRIMINATION  BY  RAILWAYS. 

where  little  traffic  existed  and  where  a  paying  return  could  not 
reasonably  be  expected  for  many  years.  The  energy  thus  ex- 
hibited was  prodigious,  but  much  of  it  was  misdirected.  The 
capital  obtained  for  many  of  these  ventures  was  secured  upon  con- 
ditions and  coupled  with  exactions  which  prudence  would  have 
avoided,  while  lavish  expenditure  and  dishonest  management 
added  to  the  evils  of  premature  construction.  The  not  uncommon 
result  was  a  capitalization  far  exceeding  the  cost  of  the  properties, 
and  a  system  of  railroads  vastly  greater  in  carrying  capacity  than 
the  traffic  furnished  for  transportation. 

Not  only  were  great  trunk  lines  pushed  through  to  the  Pacific, 
but  these  were  quickly  supplemented  with  branches  and  feeders 
designed  to  secure  a  monopoly  of  the  carrying  trade  in  the  terri- 
tory claimed  to  be  tributary  to  the  original  system.  In  their  eager- 
ness to  take  possession  of  districts  relied  upon  for  future  busi- 
ness, the  rival  companies  frequently  overlapped  each  other,  and 
duplicated  roads  in  regions  where  adequate  patronage  could  not 
be  obtained  for  a  single  line.  The  fiercest  competition  for  the 
limited  traffic  of  this  unsettled  country  was  an  inevitable  out- 
come, while  the  necessity  for  sufficient  earnings  to  meet  fixed 
charges  and  operating  expenses  tempted  resort  to  every  device 
and  allurement  by  which  business  could  be  secured.  The  same 
conditions  existed,  tho'  in  a  lesser  degree,  in  the  more  developed 
and  productive  portions  of  the  United  States.  Railroad  construc- 
tion was  everywhere  stimulated  by  extravagant  promises,  and  the 
popular  demand  taken  advantage  of  by  greedy  capitalists  and  un- 
scrupulous adventurers.  At  this  juncture,  also,  the  Canadian 
Pacific  road  was  pushed  across  the  continent,  built  by  government 
aid  and  subsidized  by  government  bounty,  to  increase  the  com- 
plication and  multiply  the  opportunities  for  transportation  abuses. 

Moreover,  it  must  be  remembered,  that  this  state  of  things  was 
established  before  its  evil  consequences  were  perceived,  and  while 
false  and  mischievous  views  respecting  the  obligations  of  public 
carriers  were  widely  entertained.  Railway  officials,  as  a  rule, 
seemed  to  regard  the  interests  which  they  controlled  as  their  per- 
sonal affairs,  to  be  dealt  with  according  to  their  own  judgment  or 
caprice.  The  agencies  of  transportation  were  treated  as  private 
property,  subject  to  bargain  and  sale  like  any  merchandise,  and 
the  prevailing  sentiment  among  railroad  managers  was  distinctly 
hostile  to  the  idea  of  state  or  national  regulation.  Under  these 
circumstances  it  is  not  surprising  that  favoritism  was  shown  with 
little  hesitation,  and  partiality  practiced  without  much  conceal- 
ment; the  granting  of  special  rates  and  the  payment  of  rebates 
were  recognized  features  of  railway  management. 

The  devices  by  which  discriminations  were  effected  are  too  nu- 
merous for  description,  but  most  of  them  may  be  grouped  in  two 
or  three  classes.  The  first  class  embraces  the  various  methods, 
more  or  less  devious,  by  which  one  or  more  persons  in  a  given 


DISCRIMINATION  BY  RAILWAYS.  187 

locality  obtained  an  advantage  in  rates  over  their  compe ting- 
neighbors.  This  is  the  most  offensive  if  not  the  most  dangerous 
phase  of  transportation  abuses.  Whether  the  preferential  result 
is  reached  by  open  agreement,  by  secret  rebate,  by  the  allowance 
of  commissions,  by  paying  unfounded  claims  for  damage  or  deten- 
tion, or  by  some  other  process  which  secures  lower  freight  charges 
to  one  shipper  than  to  another,  when  both  are  in  similar  relations 
to  the  carrier,  the  practice  in  whatever  guise  is  an  unwarrantable 
injury  to  private  rights  and  a  gross  violation  of  public  duty.  That 
one  man  should  have  an  arbitrary  advantage  over  his  fellows,  in 
respect  of  a  common  necessity,  is  repugnant  to  every  notion  of 
equality  and  offends  the  rudest  conception  of  justice.  Of  what 
avail  are  industry,  enterprise,  integrity  or  any  of  the  qualities 
which  should  lead  to  success,  if  the  less  capable  and  less  honest 
competitor  can  control  the  market  by  bargaining  with  the  railroads 
for  reduced  rates  and  special  facilities?  When  this  indispensable 
service  is  performed  on  varying  and  unequal  terms,  when  secret 
concessions  are  made  to  one  or  more  rivals  in  a  given  line  of  busi- 
ness, those  from  whom  higher  charges  are  exacted  are  placed  at  a 
a  serious  and  often  fatal  disadvantage.  In  such  a  case  the  race  is 
not  to  the  swift  nor  the  battle  to  the  strong,  but  to  the  one  whose 
freight  rates  are  the  lowest. 

The  effect  of  these  discriminations  is  far  more  hurtful  and  dan- 
gerous than  the  injury  to  individuals  which  they  directly  occasion. 
The  indirect  consequences,  none  the  less  certain  because  often  un- 
observed, extend  to  every  related  industry  and  even  to  the  remot- 
est occupations.  It  is  impossible  to  measure  the  demoralizing  re- 
sults which  follow  an  infringement  of  the  common  right  to  just 
and  equal  charges  for  public  transportation.  Practically  the  ex- 
ercise of  that  right  is  not  less  necessary  to  the  rewards  of  labor 
than  the  security  of  life  or  the  protection  of  property.  Its  constant 
enjoyment  is  essential  to  success,  its  deprivation  is  a  disaster. 
Prior  to  1887,  when  the  Act  to  Regulate  Commerce  was  passed,  the 
favoritism  and  partiality  which  characterized  the  management  of 
railroads  had  grown  to  alarming  proportions,  and  laid  the  founda- 
tions of  numerous  evils  which  have  not  yet  wholly  disappeared. 
The  marked  tendency  of  practices  which  common  usage  encour- 
eged  was  to  give  favored  shippers  an  advantage  by  which  they 
secured  a  monopoly  of  the  markets  through  the  ruin  or  withdrawal 
of  their  competitors,  These  practices  aided  the  formation  and 
fortified  the  power  of  those  vast  combinations  of  capital  which 
have  excited  such  widespread  apprehension.  Whoever  will  read 
the  report  of  the  Special  Committee  of  the  United  States  Senate, 
commonly  known  as  the  Cullom  Committee,  will  be  astounded 
at  the  magnitude  and  extent  of  the  abuses  disclosed  by  their  in- 
vestigation. Those  unfamiliar  with  the  facts  made  public  at  that 
time  can  hardly  believe  the  outrages  which  were  proven  to  exist, 
and  the  manifold  devices  by  which  the  most  flagrant  injustice  was 
perpetrated.     The  obvious  effect  of  preferential  rates  is  to  concen- 


1 88  DISCRIMINATION  BY  RAILWAYS. 

trate  the  commerce  of  the  country  in  a  few  hands.  The  favored 
shipper,  who  is  naturally  the  large  shipper,  is  furnished  with  a 
weapon  against  which  skill,  energy  and  experience  are  alike  un- 
availing. When  the  natural  advantages  of  capital  are  augmented 
by  arbitrary  deductions  from  charges  commonly  imposed,  the 
combination  is  powerful  enough  to  force  all  rivals  from  the  field. 
Production  is  controlled,  wages  fixed,  prices  fitted  to  the  desired 
profit ;  monopoly  reigns.  If  we  could  unearth  the  secrets  of  these 
modem  "  trusts,"  whose  quick-gotten  wealth  dwarfs  the  riches  of 
Solomon  and  whose  impudent  extortions  put  tyranny  to  shame, 
we  should  find  the  explanation  of  their  menacing  growth  in  the 
systematic  and  heartless  methods  by  which  they  have  evaded  the 
common  burdens  of  transportation.  The  reduced  charges  which 
they  have  obtained,  sometimes  by  favoritism  and  oftener  by 
force,  are  the  unlawful  means  by  which  their  colossal  gains  have 
been  accumulated.  Herein  lies  their  chief  power  for  evil.  No 
man  can  acquire  a  hundred  millions  in  less  than  a  score  of  years 
without  grossly  defrauding  his  fellows  by  securing  rates  and  facili- 
ties for  public  carriage  of  which  others  are  deprived.  That  is  the 
sleight  of  hand  by  which  the  marvel  is  produced,  the  key  to  the 
riddle  which  has  amazed  and  alarmed  the  nation.  Deprived  of 
special  and  exclusive  rates,  an  advantage  far  more  odious  and 
powerful  than  exemption  from  taxation,  these  trusts  are  shorn  of 
their  strength  and  divested  of  their  supremacy.  Indeed,  it  is  not 
too  much  to  say  that  no  aggregation  of  capital,  no  monopoly  in 
in  the  field  of  production,  can  be  of  serious  or  permanent  danger 
if  rigidly  subjected  to  the  rule  of  equality  in  all  that  pertains  to 
public  transportation. 

The  railroads  are  not  wholly  to  blame  for  these  discriminations. 
In  some  cases  at  least  they  have  the  excuse  of  apparent  neces- 
sity. There  are  situations  where  competition  is  so  sharp,  where 
the  traffic  of  some  large  shipper,  or  combination  of  shippers,  is 
so  needful  to  a  particular  road,  that  when  reduced  rates  are  de- 
manded as  the  alternative  of  losing  the  business,  the  carrier  can 
hardly  refuse.  Few  traffic  managers  will  submit  to  the  diversion 
of  important  tonnage  when  a  discount  from  schedule  charges  will 
retain  it,  for  the  maintenance  of  revenues  is  the  price  of  their 
positions.  This  is  the  worst  stage  of  evil.  When  the  railroads  as 
well  as  the  people  are  in  bondage  to  the  trusts,  the  point  of  ex- 
treme danger  has  been  reached.  Then  the  grip  of  the  moneyed 
monarchs  is  all-powerful  and  industrial  freedom  is  at  an  end. 

Widely  different  in  character  but  equally  far  reaching  in  effect 
are  discriminations  between  different  localities.  The  equitable 
adjustment  of  transportation  charges  between  rival  communities 
is  a  many-sided  and  obstinate  problem.  In  the  Western  sections 
of  the  country  especially,  where  development  is  rapid  and  ambi- 
tious towns  are  springing  up  in  every  quarter,  the  varying  and 
unequal  rates  from  common  sources  of  supply  to  points  in  the 
consuming  territory  which  compete  for  its   distributing  trade,  in- 


DISCRIMINATION  BY  RAILWAYS. 


189 


volve  the  prosperity  of  large  numbers  of  people  and  give  rise  to 
the  gravest  contentions.  Where  the  cost  of  an  article  is  so  much 
affected  by  the  expense  incurred  in  bringing  it  from  the  place  of 
production,  the  relative  rates  applied  to  competmg  towns  deter- 
mine to  a  great  extent  the  volume  of  their  business  and  the  meas- 
ure of  their  growth.  The  power  of  the  railroads  in  this  direction 
is  enormous.  They  can  build  up  or  destroy  a  commercial  center 
almost  at  will.  They  can  raise  or  reduce  the  prices  of  agricultural 
products,  and  so  enhance  or  depress  the  salable  value  of  wide 
areas  of  land.  They  can  decree  that  one  town  shall  be  enriched 
by  the  impoverishment  of  its  rival;  that  one  community  shall  lan- 
guish while  another  flourishes. 

It  stands  to  the  credit  of  railway  managers  that  this  extraordi- 
nary power  is  not  oftener  abused.  While  discriminations  of  this 
kind  are  frequent  and  give  rise  to  grievous  complaints,  they  are 
rarely  occasioned  by  arbitrary  or  vindictive  action.  In  most  in- 
stances the  disparity  finds  plausible  excuse,  from  the  standpoint 
of  the  carrier  at  least,  in  the  varying  and  dissimilar  circumstances 
which  surround  the  transportation.  The  justification  most  com- 
monly alleged  is  the  existence  and  controlling  force  of  water  com- 
petition. The  rail  lines  must  approximate  the  rates  afforded  by 
the  cheaper  mode  of  conveyance  or  be  excluded  from  participation 
in  the  competitive  traffic.  Upon  this  asserted  necessity  is  based 
the  whole  system  of  lower  charges  to  distant  terminals  than  are 
enforced  at  intermediate  points,  without  the  consequent  anomaly  of 
lesser  rates  for  longer  than  for  shorter  hauls.  In  such  cases  the 
disadvantage  to  the  interior  town  is  always  depressing  and  some- 
times disastrous.  Its  trade  is  limited,  its  industries  dwarfed,  its 
development  arrested.  Whatever  its  location  it  remains  sub- 
urban. The  misfortune  attending  these  discriminating  practices, 
however  compulsory  they  may  seem,  is  the  building  up  of  great 
cities  and  the  concentration  of  large  numbers  of  people  at  a  few 
central  places,  when  a  more  general  diffusion  of  business  and  of 
population  would  be  a  distinct  social  and  economic  advantage. 
This  generation  has  seen,  not  without  serious  misgiving,  the  balance 
of  political  power  transferred  from  the  country  to  the  town,  and 
popular  government  thereby  subjected  to  a  severe  and  not  wholly 
satisfactory  test.  In  seeking  the  causes  of  this  significant  change 
we  must  not  overlook  the  influence  of  these  great  railway  systems, 
and  the  potent  effect  of  unequal  charges  by  which  the  cities  have 
been  constantly  favored. 

A  third  class  of  discriminations  arises  from  the  relative  rates  on 
kindred  and  competing  articles  of  commerce.  Generally  speak- 
ing, there  is  always  more  or  less  competition  in  the  consuming 
markets  between  raw  materials  and  their  manufactured  products. 
If  either  of  these  rivals  is  unduly  aided  through  the  charges  fixed 
by  the  public  carrier,  individuals  and  communities  may  receive 
incalculable  injury.  Upon  the  fair  adjustment  of  rates  between 
such  commodities  as  wheat  and  flour,  live  animals  and  dressed 


ipo  DISCRIMINATION  BY  RAILWAYS. 

meats,  pig  iron  and  hardware,  and  scores  of  others,  the  most  im- 
portant interests  are  in  constant  dependence.  A  slight  increase, 
for  instance,  in  the  rates  on  flour,  with  a  slight  decrease  in  the 
rates  on  wheat,  would  transfer  to  Eastern  points  the  great  milling 
industries  of  the  Northwest,  and  reduce  the  business  in  a  city  like 
Minneapolis  to  the  limited  demands  of  its  local  trade.  So  an  in- 
considerable variation  in  the  relative  charges  on  dressed  meats 
and  live  animals  might  shift  the  location  of  every  large  slaughter 
house  from  one  part  of  the  country  to  another,  with  endless  dis- 
comfort and  loss  beyond  the  reach  of  redress.  These  illustra- 
tions may  be  extreme,  but  they  indicate  the  power  for  wrong- 
doing which  the  railroads  possess  through  the  manipulation  of 
rates  on  related  traffic.  In  view  of  their  opportunities  and  the 
temptations  to  which  they  are  exposed,  it  is  creditable  to  their 
managers  that  the  obligations  of  neutrality  are  so  generally  ob- 
served and  that  discriminations  of  this  character  so  seldom  occur. 

It  requires  little  consideration  of  the  problem  which  these  ob- 
servations suggest  to  see  the  necessity  for  government  regulation. 
Some  authority  there  must  be,  superior  to  and  independent  of. 
the  railroads  themselves,  to  supervise  their  management,  restrain 
their  exactions,  and  enforce  their  compliance  with  the  rule  of 
equality.  The  question  whether  such  regulation  shall  be  under- 
taken has  passed  the  stage  of  discussion.  Existing  laws  have  ac- 
complished much,  and  wise  legislation  will  accomplish  more.  The 
limited  extent  to  which  the  several  states,  for  obvious  reasons, 
can  afford  effectual  relief,  casts  the  principal  burden  upon  the 
National  Government.  The  Act  to  Regulate  Commerce  was  the 
initial  assertion  by  Congress  of  its  constitutional  power  over  the 
agencies  of  transportation.  It  was  not  framed  to  meet  a  tempo- 
rary emergency  nor  in  obedience  to  a  transient  and  spasmodic 
sentiment;  it  was  the  the  inauguration  of  a  fixed  and  permanent 
policy.  However  crude  and  inadequate  in  some  of  its  provisions, 
it  is  the  legislative  expression  of  a  high  and  wholesome  principle. 
It  assumes  that  the  railroads  are  engaged  in  a  public  service,  and 
requires  that  service  to  be  impartially  performed.  It  declares 
that  the  large  shipper  is  entitled  to  no  advantage  over  his  smaller 
rival  either  in  rates  or  accommodations,  and  that  the  charges  to 
both  shall  be  measured  by  the  same  standard.  It  insists  upon  the 
right  of  every  person  to  use  the  facilities  which  the  carrier  pro- 
vides, on  equal  terms  with  all  his  fellows,  and  finds  an  invasion  of 
that  right  in  every  deviation  from  rates  commonly  enforced.  It 
makes  favoritism  an  offense  and  unjust  discrimination  a  crime. 

To  bring  the  business  of  public  transportation  into  full  con- 
formity with  this  great  principle,  to  enforce  the  beneficent  rule  of 
just  rates  and  equal  treatment,  and  to  adjust  this  complex  system 
of  railroads  to  the  enlarging  needs  of  the  people,  is  to  bestow  an 
inestimable  benefit  upon  every  pursuit  and  every  person.  It  is 
at  once  the  most  difficult  and  most  valuable  service  which  the 
Government  can  perform. 


DISCRIAMNATIONS  TROAX  THE  USE  OF 
PRIVATE  CARS  OE  SHIPPERS. 

Hon.  Augustus  Schoonmaker^ 

Ex-Member  of  the  Interstate  Commerce  Commission. 

One  of  the  features  of  transportation  at  the  present  day  de- 
manding serious  consideration  is  the  extensive  use  of  private  cars 
owned  by  shippers.  If  the  use  of  such  cars  concerned  only  carriers 
themselves  it  would  be  a  private  matter,  to  be  dealt  with  between 
the  managers  of  corporations  acting  as  common  carriers  and  the 
investors  in  the  property,  but  the  discriminations  among  shippers 
to  which  the  practice  leads  make  it  a  public  matter  of  pronounced 
importance. 

The  use  by  carriers  of  private  cars  of  shippers  instead  of  their 
own  equipment  has  developed  in  the  last  few  years  to  very  large 
proportions.  Many  thousands  of  them  are  now  in  use  for  the 
transportation  of  various  kinds  of  traffic.  The  principal  articles 
for  which  they  are  used  are  such  staples  as  petroleum  and  cotton- 
seed oils,  turpentine,  live  stock,  and  dressed  meats.  These  cars 
are  mostly  of  improved  styles,  such  as  tank  cars  for  oil  and  tur- 
pentine, live-stock  cars  adapted  for  feeding  and  watering  stock  on 
the  train,  and  refrigerator  cars  arranged  for  the  preservation  of 
fresh  meats;  and  they  usually  cost  somewhat  more  than  the  cars 
owned  and  furnished  by  carriers  themselves.  In  some  instances, 
however,  ordinary  box  cars  similar  to  those  furnished  by  carriers 
are  supplied  by  shippers.  Details  with  regard  to  the  varieties 
and  numbers  of  private  cars  used,  owned,  and  furnished  by  ship- 
pers, their  styles  and  cost,  or  even  their  advantages  to  the  traffic 
carried  in  them,  are  not  material  to  the  present  purpose,  which  is 
only  to  call  attention  to  the  public  consequences  of  their  use,  in 
the  form  of  discrimination  between  shippers  who  own  such  cars 
and  those  who  use  the  carriers'  own  equipment. 

The  right  of  a  railroad  company  to  haul  private  cars  of  shippers 

Reprinted  from  proceedings  of  the  National  Convention  of  Railroad  Commissioners,  held 
at  Washington,  D.  C,  March,  1891. 


192         DISCRIMINATIONS  FROM  USE  OF  PRIVATE  CARS. 

if  it  see  fit  to  do  so,  is  not  now  called  in  question ;  but  a  road  is 
under  no  obligation  to  do  so.  It  does  so  in  the  exercise  of  its 
own  volition.  The  original  conception,  in  the  early  period  of 
railroads,  that  a  railroad  was  only  a  common  public  highway  upon 
which,  as  upon  a  turnpike,  any  one  might  place  his  vehicle  and 
have  it  drawn  by  paying  the  toll,  was  long  since  justly  discarded 
and  has  no  existence  in  national  regulation.  Traces  of  it  may, 
however,  linger  in  some  state  statutes.  Railroad  companies  are 
chartered  for  much  more  than  the  mere  construction  of  their  road- 
ways. They  are  required  and  expected  to  equip  and  operate  their 
roads,  and  their  equipment  must  be  suitable  and  sufficient  for  the 
business  in  which  they  engage.  These  are  primary  public  duties, 
required  as  conditions  of  the  franchise,  and  admit  of  no  excuse  for 
non-compliance. 

They  are  intended  to  be,  and  are  in  fact,  common  carriers,  and 
the  relations  and  office  of  a  common  carrier  are  inconsistent  with 
any  meddling  on  the  part  of  others  with  its  property  or  its  mode 
of  carrying  on  its  business.  Subject  only  to  the  authority  of  gov- 
ernment, its  exclusive  control  of  its  tracks  and  vehicles  of  carriage 
is  indispensable  to  its  rights  and  duties,  and  this  principle  accords 
with  sound  public  policy. 

In  contemplation  of  law,  cars  used  by  a  railroad  company  in  its 
ordinary  business,  however  furnished,  whether  by  itself  or  by 
private  shippers,  are,  for  transportation  purposes,  deemed  its  own, 
and  the  rules  for  the  regulation  of  commerce,  as  well  as  the  gen- 
eral rules  of  law  respecting  the  responsibility  of  the  company  to 
the  public  for  care  and  safety,  apply  alike  whatever  vehicles  may 
be  used  or  however  acquired.  If  a  railroad  were  under  compul- 
sion to  haul  private  cars  when  offered,  very  serious  questions 
might  arise  as  to  its  responsibility  for  the  safety  of  cars,  or  for 
accidents  resulting  from  ill-adapted  cars,  defective  safety  appli- 
ances, or  the  like.  The  law  therefore,  here,  as  in  England  where 
great  attention  has  been  given  to  the  subject,  leaves  railroads  free 
to  haul  or  not  to  haul  private  cars  in  their  discretion,  but  brings 
the  conduct  of  the  company  in  its  transportation  business  under 
the  obligations  and  restraints  of  public  regulation,  without  regard 
to  the  kind  of  cars  used  or  the  mode  in  which  they  maj^  be  pro- 
cured. 

The  law  for  purposes  of  regulation  recognizes  only  two  classes 
to  which  its  provisions  apply.  One  consists  of  the  carriers,  whose 
function  is  to  serve  the  public ;  the  other  is  the  whole  public,  whose 
right  it  is  to  be  served ;  and  the  fundamental  principle  applicable 
to  both  is  equality  of  service  and  charges  under  conditions  that 
are  substantially  similar.  The  is  no  middle  ground,  nor  an  inter- 
mediate class  to  hold  a  dual  relation  as  shippers  and  quasi  part- 
ners of  carriers,  and  so  gain  preferences  over  other  shippers  by 
sharing  the  earnings  of  the  carriers  as  part  of  their  profits  as  ship- 
pers.    Shippers  must  stand  on  the  same  plane,  and  one  shipper 


DISCRIMINATIONS  FROM  USE  OF  PRIVATE  CARS.         193 

cannot  secure  to  himself,  by  any  pretext  or  device,  a  pecuniary 
advantage  in  transportation  over  other  shippers.  Every  prefer- 
ence given  by  the  acts  of  a  carrier  is  under  the  ban  of  the  law,  and 
the  methods  by  which  it  may  be  done  are  not  material. 

These  observations  lead  to  the  particular  point  intended  to  be 
emphasized — the  discriminations  resulting  from  the  use  of  cars  of 
shippers.     The  method  by  which  this  is  done  is  usually  as  follows : 

A  firm,  or  perhaps  a  combination,  dealing  in  some  article  of 
commerce,  not  satisfied  with  the  ordinary  trade  profits  of  its  busi- 
ness common  to  others  engaged  in  like  business,  desires  to  aug- 
ment its  profits  by  some  auxiliary  means  in  which  its  rivals  may 
not  be  able  to  compete.  It  thereupon  builds  a  large  number  of 
cars  to  be  used  exclusively  for  the  carriage  of  its  own  traffic,  un- 
less, as  is  the  case  in  some  instances,  some  traffic  can  be  carried 
on  the  return  trips  of  the  cars.  The  cars  so  built  are  usually  of 
some  improved  style  not  furnished  by  the  carrier  itself.  A  con- 
tract is  then  made  with  railroad  companies  to  haul  these  cars  with- 
out charge  therefor  to  the  shipper,  but  the  carrier  to  pay  compen- 
sation for  their  use,  in  the  form  of  mileage,  usually  three-quarters 
of  a  cent  for  every  mile  hauled  both  loaded  and  empty,  though 
sometimes  more.  As  the  revenue  from  mileage  depends  on  the 
number  of  miles  hauled,  it  is  part  of  these  arrangements  that  the 
cars  shall  be  hauled  at  high  rates  of  speed  and  quick  and  frequent 
trips  made.  Sometimes  some  additional  allowance  is  made  for 
some  terminal  matter,  such  as  yardage,  actual  or  constructive,  for 
live  stock ;  and  in  all  cases  there  is  free  storage  of  cars  and  ter- 
minal switching  at  the  carriers'  expense. 

Investigations  made  by  the  Interstate  Commerce  Commission 
at  different  times  have  disclosed  to  some  extent  the  very  large 
sums  received  by  shippers  as  mileage  for  the  use  of  such  cars. 
By  an  investigation  made  in  1889  it  appeared  that  on  a  single  line 
of  road  between  Chicago  and  an  interior  eastern  point — a  distance 
of  470  miles — refrigerator  cars  owned  by  three  shipping  firms 
made  in  nine  months,  from  August  i,  1888,  to  May  i,  1889,  7,428,- 
406  miles,  and  earned  for  mileage  $72,945.97,  being  about  $8,112 
a  month,  or  substantially  at  the  rate  of  $100,000  a  year. 

By  another  investigation,  made  in  1890,  it  appeared  that  private 
stock  cars  to  the  number  of  250  had  been  used  upon  a  line  made 
up  of  two  connecting  roads  between  Chicago  and  New  York,  be- 
ginning with  150  cars  on  September  i,  1888,  increased  30  more  a 
month  later,  20  more  another  month  later,  and  reaching  the  total 
of  250  in  June,  1890;  that  the  cars  altogether  had  cost  $156,500, 
and  had  earned  for  mileage  in  two  years,  from  September  i,  1888, 
to  September  i,  1890,  $205,582.68;  that  the  entire  expense  to  be 
deducted  during  that  period  for  car  repairs  and  salaries  for  their 
management  was  $34,050.48,  leaving  net  revenue  to  the  amount 
of  $171,532.20,  being  an  excess  of  $15,032  above  the  whole  cost  of 
the  cars.     The  cars  were  therefore  paid  for  and  a  margin  besides 

13 


194         DISCRIMINATIONS  FROM  USE  OF  PRIVATE  CARS. 

in  two  years,  and  thereafter,  tinder  the  same  arrangement  and 
with  a  corresponding  use  of  the  cars,  an  income  of  upwards  of 
$100,000  a  year  was  assured  on  an  investment  fully  repaid  or  in 
effect  on  no  investment  whatever. 

It  is  obvious  what  advantages  to  a  shipper  furnishing  cars  such 
a  revenue  from  their  use  affords  him  over  a  competitor  shipping 
in  cars  belonging  to  the  carriers.  The  latter  pays  the  transpor- 
tation charges  in  full.  The  former  is  reimbursed  for  a  consider- 
able part  of  these  charges  by  the  mileage  received.  If  both  sell 
in  the  same  market  and  at  the  same  price  the  shipper  owning  the 
cars  makes  a  profit  greatly  in  excess  of  the  other,  or,  by  reason  of 
his  combined  business  as  car-owner  and  shipper,  can  undersell  his 
competitor,  command  the  market,  and  still  make  a  profit,  while 
the  other  must  carry  on  his  business  at  a  loss  or  be  driven  out  of 
the  market. 

By  still  other  investigations  at  various  times  the  gross  discrimi- 
nations that  have  characterized  the  transportation  of  petroleum 
oil  in  barrels  and  in  tanks,  in  which  payment  for  the  use  of  tank 
cars  has  been  a  factor,  have  been  developed.  Thousands  of  such 
cars  are  owned  by  shippers  and  used  exclusively  for  the  carriage 
of  their  own  oil.  They  are  paid  by  the  carriers  for  the  mileage 
made  by  the  cars,  whether  loaded  or  empty.  The  cars  are  prac- 
tically part  of  the  investment  in  their  business,  and  the  revenue 
received  for  their  use,  is,  to  an  extent  at  least,  a  rebate  from  the 
rate,  which  gives  the  shippers  owning  the  cars  a  corresponding 
advantage  in  the  markets.  Details  need  not  be  entered  into.  It 
is  sufficient  to  say  that  the  injurious  consequences  have  been  very 
generally  felt  and  observed.  Dealers  who  have  been  obliged  to 
ship  in  barrels  in  the  box  cars  furnished  by  carriers  have  met  with 
disaster  and  been  largely  forced  to  relinquish  the  business,  while 
the  tank  shippers  owning  their  own  cars  have  enormously  pros- 
pered and  rapidly  absorbed  the  business  of  their  less  favored  com- 
petitors, until  one  great  combination  has  become  an  overshadow- 
ing monopoly,  representing  fabulous  wealth  with  corresponding 
power  and  influence,  able  to  command  where  other  competitors 
must  solicit — and  too  often  solicit  in  vain — and  accorded  on  the 
part  of  carriers  an  apparently  eager  subservience. 

A  full  and  careful  statement  showing  the  aggregate  of  private 
cars  owned  by  shippers  and  of  the  moneys  paid  for  their  use, 
would  exhibit  results  that  would  be  startling  both  in  their  magni- 
tude and  character.  A  single  railroad  company,  as  shown  by  its 
official  report  for  1889,  paid  car  mileage  to  sixty-five  different 
companies  and  firms  owning  cars,  of  which  fifty-four  were  ship- 
pers and  the  remaining  eleven  fast-freight  organizations.  The 
revenues  of  carriers  are  seriously  impaired  by  the  amount  these 
payments  add  to  the  expenses  of  operation,  and  it  is  not  uncom- 
mon when  rates  are  abnormally  low  that  after  deduction  of  these 
payments  not  even  the  cost  of  carriage  is  left  to  the  road,  so  that 


DISCRIMINATIONS  FROM  USE  OF  PRIVATE  CARS.         195 

the  traffic  thus  carried  is  sometimes  detrimental  to  the  carrier. 
The  practice  is  therefore  neither  good  transportation  policy  from 
the  carriers'  standpoint,  nor,  in  a  larger  sense,  good  public  policy, 
which,  as  its  essential  feature,  requires  the  absence  of  every  form 
of  favoritism  and  preference  on  the  part  of  government  or  the 
public  agencies,  and  equal  opportunities  for  enterprise  and  energy 
in  the  competitions  of  business,  to  the  end  that  individual  charac- 
ter— the  state's  chief  security — may  be  developed  and  merit  at- 
tain its  just  reward. 

The  railroads  of  the  country  are  themselves  responsible  for  the 
use  of  private  cars  of  shippers  upon  their  roads  and  for  the  abuses 
that  have  resulted  from  their  use.  The  reluctance  and  even  ne- 
glect of  the  roads  to  provide  suitable  and  improved  cars  to  meet 
the  growing  demands  of  commerce  and  carry  certain  kinds  of 
traffic  without  injury  to  its  usefulness  and  market  value,  at  first 
impelled  shippers  themselves  to  do  what  the  carriers  should  have 
done — to  furnish  cars  suited  to  their  business.  The  hauling  of 
the  shippers'  cars  then  became  a  matter  of  competition  among  the 
roads,  and  they  mistakenly  adopted  the  plan  of  paying  to  shippers 
the  same  or  even  a  greater  mileage  rate  than  the  roads  allow  be- 
tween themselves  in  the  interchange  of  cars,  where  the  allowances 
are  reciprocal  and  for  the  most  part  substantially  equalize  each 
other.  But  in  the  case  of  shippers'  cars  there  is  no  reciprocity. 
The  money  is  paid  directly  to  the  shipper,  and,  to  the  extent  that 
it  exceeds  current  interest  on  the  cost  of  the  car  and  a  fair  allow- 
ance for  depreciation,  it  is  a  direct  loss  to  the  carrier  and  a  dis- 
crimination in  favor  of  the  shipper.  Although  three-quarters  of 
a  cent  a  mile  is  the  usual  mileage  rate  paid,  the  allowance  is  some- 
times a  cent  a  mile,  or  even  a  cent  and  a  half  a  mile,  and  contracts 
have  been  entered  into  by  carriers  with  shippers  to  pay  such  rates 
for  a  period  of  five  years. 

The  point  now  aimed  at  is  the  discrimination  to  shippers. 
Under  existing  methods  this  has  become  an  evil  so  general  and  of 
such  proportions  that  it  can  no  longer  be  disregarded,  and  a  rem- 
edy is  of  urgent  importance.  Any  plan  involving  the  payment  of 
mileage  to  shippers  is  evidently  impracticable.  No  mileage  basis 
can  be  fixed  that  will  apply  to  different  kinds  of  cars  and  that  will 
effectually  guard  against  discrimination.  It  doubtless  is  difficult 
to  devise  any  plan  that  will  be  just  and  not  liable  to  some  abuse. 
In  England,  where  many  private  cars  are  furnished  by  shippers, 
especially  in  the  coal  trade,  a  practice  prevails  of  making  an  al- 
lowance to  the  car-owner  for  the  tonnage  carried,  but  obviously 
that  method  has  defects  and  is  open  to  abuse. 

If  a  radical  change,  forbidding  the  use  of  private  cars  of  ship- 
gers  and  requiring  carriers  to  furnish  all  cars  themselves,  is  im- 
practicable, and  if  the  practice  of  using  cars  of  shippers  and  pay- 
ing for  their  use  is  to  continue,  a  feasible  plan  would  seem  to  be 
that  the  payments  in  no  case  should  exceed  what  the  expense 


196         DISCRIMINATIONS  FROM  USE  OF  PRIVATE  CARS. 

would  be  to  the  carrier  if  it  owned  the  car — that  is  to  say,  the  cur- 
rent interest  on  its  cost  and  a  just  allowance  for  depreciation,  and 
a  right  on  the  part  of  the  carrier  to  use  the  cars  for  other  shippers 
when  their  owners  do  not  furnish  loading — with  the  provision  that 
all  contracts  for  the  use  of  such  cars  should  be  filed  with  the  Inter- 
state Commerce  Commission  and  the  reasonableness  of  the  allow- 
ances be  subject  to  its  jurisdiction. 


LONG  VERSUS  SHORT  HAUL, 

By  Gen.  E.  P.  Alexander. 

Associate  Editor  of  The  Railroad  Gazette. 

The  circuit  court  of  the  United  States,  for  the  northern  district 
of  Georgia,  will  soon  render  a  decision  upon  a  question  of  vital 
consequence  to  the  transportation  interests  of  the  entire  country — 
one  which  for  twenty  years  has  lain  at  the  root  of  nearly  all  the 
agitation  and  legislation  for  the  regulation  of  railroad  traffic. 

The  question  involves  the  right  of  any  railroad,  or  combination 
of  railroads,  to  charge  or  accept  a  less  rate  of  freight  on  articles 
carried  over  a  greater  distance  than  a  charge  for  the  same  articles 
carried  a  shorter  distance  over  the  same  line  at  the  same  time. 
No  practice  of  railroads  has  ever  excited  such  universal  and  in- 
dignant denunciation.  It  has  been  attributed  to  a  purely  gratui- 
tous disposition  to  exercise  and  display  a  great  power  they  are  sup- 
posed to  possess  of  building  up  or  of  pulling  down  commercial 
centers  at  their  pleasure.  To  the  ordinary  man  the  argument 
seems  irresistible,  that  if  this  servant  of  the  public  can  afford  to 
carry  a  carload  of  goods  from  A  to  Z,  over  the  whole  alphabet, 
for  a  certain  sum,  it  is  manifest  extortion  to  charge  a  greater  sum 
for  a  similar  carload  carried  over  but  a  part  of  the  same  route  and 
stopped  at  some  intermediate  station,  as  Q,  R  or  S.  Against 
such  extortion,  the  effects  of  which  seemed  capable  of  destroying 
or  building  up  the  manufacturing  or  commercial  supremacy  of 
whole  communities,  the  strong  arm  of  the  law  should  be  invoked. 
Congress  undertook  to  investigate  and  legislate,  and  the  commit- 
tee rooms  of  House  and  Senate  became  battlefields,  where  ardent 
and  able  advocates  of  the  popular  view,  and  of  commercial  inter- 
ests, which  thought  themselves  unjustly  oppressed,  struggled  with 
the  representatives  of  railroad  interests,  who  endeavored  to  ex- 
plain that  their  so-called  extortion  and  discrimination  was  but  ap- 
parent and  not  real ;  that  it  was  the  result  of  circumstances  beyond 
their  control  and  the  underlying  principle  upon  which,  the  world 
over,  railroad  rates  are  necessarily  adjusted.  A  brief  resume  of 
their  arguments  will  be  given  below,  but  the  outcome  of  the  bat- 
tles before  the  committee  was  peculiar,  and  has  resulted  in  a  sort 

Reprinted  by  permission  from  The  Independent  of  October  6,  1892. 


198  LONG  VERSUS  SHORT  HAUL. 

of  armed  truce  between  headquarters,  with  guerrilla  skirmishes 
on  the  outposts  for  five  years.  At  last  however,  the  leaders  have 
joined  issue  in  the  United  States  courts,  and  the  decision  of  the 
Supreme  Court  will  doubtless  be  finally  invoked. 

Of  course,  in  a  matter  of  such  importance  and  complication  as 
the  regulation  of  all  interstate  railroad  traffic,  there  were  many 
principles  and  practices  discussed  in  the  argument,  and  finally 
settled  by  the  bill,  which  as  a  result,  became  law  early  in  1887; 
but  we  have  only  to  do  here  with  its  dictum  on  the  matter  of  '  'long 
versus  short  haul,"  as  it  came  to  be  called  for  short.  On  this  sub- 
ject the  prevailing  sentiment  in  the  House  and  Senate  differed. 
The  House  generally  favored  an  absolute  prohibition,  under  all 
circumstances,  of  the  practice  of  accepting  less  for  the  longer  haul. 
The  Senate  generally  believed  that  under  certain  circumstances 
the  practice  was  proper  and  even  necessary.  So  the  Senate  put 
in  the  bill  the  qualifying  phrase  that  the  practice  should  be  un- 
lawful only  when  the  short  haul  freight  was  carried  under  "  sub- 
stantially similar  circumstances  and  conditions  "  to  those  surround- 
ing the  long  haul  freight.  If  they  were  under  ' '  substantially 
similar  circumstances,"  the  charge  made  for  the  long  should  limit 
the  charge  on  the  short;  if  not,  then  the  short  haul  charge  must 
stand  on  its  own  bottom  as  to  whether  it  was  a  reasonable  charge 
for  the  service  rendered. 

Neither  side  could  object  to  so  fair-sounding  a  condition,  even 
tho'  it  might  be  less  definite  than  desirable  in  important  prohibi- 
tive legislation ;  so  the  bill  became  a  law,  and  the  interpretation 
of  the  phrase  was  thrown  upon  the  Interstate  Commerce  Commis- 
sion. 

Cases  were  speedily  made  before  it,  and  now  it  becomes  neces- 
sary to  an  understanding  of  the  situation  to  explain  the  ' '  circum- 
stances and  conditions  "  under  which  the  railroads  practiced  and 
justified  the  apparently  absurd  habit  of  charging  less  for  a  greater 
service. 

A  full  discussion  of  all  the  relations  between  railroad  earnings, 
expenses  and  charges  would  be  longer  than  the  moral  law ;  but 
as  the  moral  law  can  be  condensed  into  the  Golden  Rule,  "  Do  as 
you  would  be  done  by,"  so  the  essential  principles  involved  in  all 
railroad  rates  and  classifications  can  be  stated  in  two  very  simple 
propositions. 

The  first  is  that  railroad  services  must  be  sold  rather  by  what 
they  are  worth  than  by  what  they  cost.  In  fact,  that  is  the  gen- 
eral rule  for  all  personal  services  the  world  over.  To  begin  with, 
it  would  be  as  utterly  impossible  to  divide  out  their  varied  ex- 
penses for  management,  wear  and  tear,  accidents,  and  the  innu- 
merable varieties  of  traffic,  and  assign  a  cost  to  each  one,  as  it 
would  be  for  a  doctor  to  estimate  what  it  costs  him  to  prescribe 
for  each  separate  disease  to  which  his  patients  are  liable.  Rail- 
roads the  world  over  charge  much  more  for  carrying  dry  goods 


LONG  VERSUS  SHORT  HAUL.  199 

than  for  carrying  bricks,  ton  for  ton,  tho'  the  difference  in  cost  is 
imperceptible.  If  they  did  not  the  transportation  of  bricks  would 
practically  cease,  and  all  traffic  would  be  so  reduced  that,  to  live, 
the  railroad  might  even  have  to  raise  the  rates  on  dry  goods. 

But  the  principle  is  too  simple  and  too  universal  in  all  business 
matters  to  need  further  illustration.  Briefly,  it  may  be  expressed 
in  the  phrase  that  transportation  must  be  charged  for  in  propor- 
tion to  the  value  of  the  service  rendered. 

The  second  proposition  to  be  recognized  in  the  consideration 
of  all  rate  questions,  can  be  most  familiarly  illustrated  in  the  old 
proverb,  that  "  carrying  coals  to  Newcastle  "  is  a  profitless  opera- 
tion. Newcastle  is  supposed  to  be  already  abundantly  supplied 
with  coal  as  cheap  as  can  be  found  anywhere  else.  If,  therefore, 
a  railroad  starting  five  hundred  miles  away  should  carry  coal 
toward  Newcastle,  as  it  came  within  the  influence  of  the  Newcas- 
tle market,  the  value  of  the  service  rendered  would  decrease  the 
farther  it  was  carried ;  for  it  would  find  cheaper  coal  already  on 
the  ground.  Therefore  the  rates  which  the  railroads  could 
charge  would  decrease  as  the  distance  increased.  For  a  certain 
distance  the  railroad,  having  its  managing  and  accounting  depart- 
ments, its  roadbed,  crossties,  etc.,  to  keep  up  anyhow — and  per- 
haps empty  cars  engaged  in  other  traffic  returning  to  Newcastle — 
might  afford  to  carry  more  or  less  coal  at  rates  far  below  its  aver- 
age rates,  and  still  make  a  profit,  while  promoting  traffic  and  com- 
petition for  the  public.  But  the  business  would  finally  reach  a 
limit  where  even  the  extra  fuel  consumed  in  hauling  a  car  full  in- 
stead of  empty  would  exceed  in  value  the  service  rendered,  and 
there  the  business  would  have  to  stop.  It  is  clear,  too,  that  the 
transportation  of  firewood  to  places  near  Newcastle  would  be  un- 
der similar  conditions  to  that  of  coal;  for  the  price  of  the  coal 
would  regulate  that  of  the  firewood,  which  is  an  inferior  substi- 
tute. 

Now  this  perfectly  illustrates  the  "circumstances  and  condi- 
tions "  under  which  alone  are  railroads  ever  so  generous  and  lib- 
eral-minded as  to  charge  less  for  the  longer  haul.  It  is  always 
where  the  place  enjoying  the  lower  rate  for  the  longer  haul  has 
already  a  cheaper  source  of  supply  for  the  material  to  be  trans- 
ported, or  of  some  substitute  therefor.  These  conditions,  they 
claim,  are  the  most  substantial  which  can  affect  comparative  rates; 
and  they  justify  and  legalize  the  apparent  discriminations,  which 
are  really  the  result  of  the  Creator's  distribution  of  different  kinds 
of  mineral  and  agricultural  wealth,  and  of  lands  and  seas,  and 
rivers  and  mountains. 

Under  the  law  the  first  interpreter  of  the  intent  of  the  Senate 
amendment,  as  accepted  by  the  House  and  made  law,  is  the  Inter- 
state Commerce  Commission.  This  body,  in  the  first  cases 
brought  before  it,  seemed  rather  to  stick  in  the  bark  of  the  ques- 
tion than  to  go  to  its  heart,  and  decided  individual  cases  upon 
their  individual  peculiarities. 


2  00  LONG  VERSUS  SHORT  HAUL. 

For  instance — to  square  some  of  the  cases  with  our  general  illus- 
tration of  carrying  coal  and  firewood  to  places  where  they  come  in 
competition  with  coal  from  Newcastle — they  decided  that  a  rail- 
road might  be  justified  in  accepting  a  lower  rate  for  a  longer  haul 
on  coal  only,  but  not  on  firewood,  and  then  only  in  case  the  com- 
petitive coal  was  brought  from  Newcastle  by  a  water  route. 
Within  the  limits  of  this  article  it  is  impossible  to  explain  the  pe- 
culiarities of  different  cases  and  the  arguments  of  the  commission, 
not  always  entirely  harmonious,  nor  is  it  important  to  do  so  for 
an  understanding  of  the  issue  now  before  the  United  States 
court.  But,  briefly,  the  general  effect  of  their  decisions  in  many 
cases  was  that  competition  resulting  from  the  existence  of  water 
routes  of  transportation  might  legalize  lesser  rates  on  longer 
hauls,  but  -that  competition  resulting  from  other  causes — such  as 
that  from  other  railroad  lines,  or  from  competition  of  other  mar- 
kets or  products — would  not. 

They  therefore  approved  of  some  cases  and  disapproved  of 
others ;  and  for  five  years  the  arguments,  pro  and  con,  have  been 
gone  over,  and  the  roads  have  complied  more  or  less  willingly  and 
fully  with  the  mandates  of  the  commission.  At  last,  however,  a 
definite  issue  has  been  made. 

The  case  is  this :  Buggies  are  manufactured  largely  in  Cincin- 
nati, and  still  more  largely  in  Baltimore,  New  York  and  eastern 
cities ;  so  that  as  Cincinnati  buggies  are  carried  into  territory  more 
cheaply  reached  from  the  east,  this  transportation — like  that  of  coal 
toward  Newcastle — ^becomes  less  and  less  valuable  as  it  reaches 
places  accessible  to  eastern  cities  by  cheaper  routes  either  of 
rail  or  water ;  and  the  railroads  running  from  Cincinnati  have  al- 
ways adjusted  their  rates  accordingly.  On  the  rail  line,  for  in- 
stance, extending  southeast  from  Cincinnati  to  Charleston,  via 
Chattanooga,  Atlanta  and  Augusta,  the  influence  of  eastern  bug- 
gies was  felt  wherever  a  transportation  line  from  the  east  came  in. 
At  Chattanooga  it  was  of  slight  consequence,  at  Atlanta  it  was 
important,  at  Augusta  it  was  of  controlling  force,  and  at  Charles- 
ton it  was  overwhelming.  The  rates  from  Cincinnati  increased 
gradually  until  after  passing  Atlanta  far  enough  to  be  affected  by 
eastern  buggies  coming  up  via  Augusta.  There  the  rate  reached 
its  maximum,  about  halfway  between  Atlanta  and  Augusta. 
Thence  it  decreased,  and  was  the  same  at  Augusta  as  at  Atlanta, 
and  at  Charleston  it  was  still  lower.  The  case  was  made  in  a 
small  town  called  Social  Circle  near  the  maximum  point.  The 
railroad  commission,  being  appealed  to,  decided  that  it  was  illegal 
for  the  railroads  to  charge  less  for  the  longer  hauls  on  buggies 
from  Cincinnati  to  Augusta,  or  Charleston  than  to  Social  Circle. 
The  railroads  have  refused  to  accept  this  ruling  of  the  commis- 
sion as  the  true  intent  of  the  law,  and  have  appealed  to  the  United 
States  court  to  interpret  it. 

The  point  to  be  decided  is,  whether  the  words  ' '  substantially 


LONG  VERSUS  SHORT  HAUL.  201 

similar  circumstances  and  conditions  "  refer  to  circumstances  and 
conditions  which  affect  the  value  of  the  service  or  transportation 
at  the  point  of  destination,  and  therefore  limit  the  price  which 
can  be  obtained  for  it ;  or  whether  they  refer  to  some  other  cir- 
cumstances, undefined  and  rather  difficult  to  imagine,  since  all 
circumstances  of  time,  place,  direction  and  character  of  freight 
handled  are  elsewhere  specifically  referred  to  in  the  law. 

There  would  seem  to  be  no  other  "  substantial  "  circumstances 
left  save  those  affecting  the  value  of  the  service  rendered.  These 
are  all  practically  circumstances  of '  competition — the  competition 
of  different  routes,  of  different  markets,  or  different  products.  It 
is  the  circumstance  of  competition  which  produces  the  effect  ac- 
cording to  its  degree,  whatever  may  be  its  source  or  character. 
It  might  be  by  other  rail  lines  from  the  same  or  other  sources  of 
supply,  by  water  or  by  balloon — the  effect  being  the  same  in  all 
cases. 

This  analysis  of  the  underlying  cause  of  the  apparently  gratui- 
tous discrimination  involved  in  the  custom  of  charging  less  on  cer- 
tain longer  hauls,  indicates  clearly,  also,  that  the  practice  gives 
no  arbitrary  power,  and  has  little  effect  in  altering  the  commer- 
cial supremacy  of  different  localities. 

Newcastle  does  not  derive  her  supremacy  in  coal  from  the  fact 
that  railroads  give  lesser  rates  on  longer  hauls  of  coal  toward  it, 
but  from  her  natural  advantages  of  location.  Railroads  are  sim- 
ply compelled  to  recognize  these  advantages,  and  adjust  their 
rates  accordingly ;  being  forced,  in  the  sharp  struggle  for  exist- 
ence, to  accept  half  loaves  when  they  cannot  get  whole.  But  free 
and  unrestricted  liberty  to  enter  into  this  competition  distributes 
its  advantages  to  all  adjoining  places  in  proportion  to  their  dis- 
tances, thus  promoting  general  prosperity. 

The  court,  however,  cannot  make  the  law,  and  can  only  inter- 
pret it.  Should  their  interpretation  be  adverse  to  the  railroads 
the  railroad  transportation  of  this  country  will  be  put  under  con- 
ditions which  do  not  exist  in  any  other ;  for  in  Canada,  England 
and  on  the  continent  of  Europe,  railroads  are  freely  allowed  to 
meet  competition.  The  effect  of  strictly  enforcing  such  a  law  here 
would  be  to  attach  a  severe  penalty  to  it,  one  which  would  inevi- 
tably largely  restrict  and  curtail  it. 

This  might  indeed  be  to  the  railroads  rather  a  blessing  than  a 
calamity,  were  a  strict  enforcement  possible ;  but  the  effort  would 
only  produce  confusion,  and  result  in  a  repeal  of  the  law ;  foj  any 
restriction  so  opposed  to  the  spirit  of  the  age  cannot  long  prevail. 

A  very  simple  illustration  will  make  clear  the  essential  features 
of  nearly  every  case  in  the  United  States  where  competition  of 
routes  leads  to  lower  charges  upon  the  longer  hauls. 

Imagine  four  cities,  N,  E,  S  and  W,  at  the  north,  east,  south  and 
west  points  of  any  closed  figure,  as  a  circle.  Then  let  an  eastern 
railroad  run  from  N  through  E  and  S  to  W,  and  a  western  from 


202  LONG  VERSUS  SHORT  HAUL. 

N  through  W  and  S  to  E.  There  are  then  two  overlapping  routes 
from  N  to  each  of  the  two  other  cities,  an  eastern  and  a  western. 
To  S  they  are  practically  of  equal  length,  but  to  E  the  eastern  is 
much  the  shorter,  and  to  W  the  western.  Let  90  be  a  reasonable 
average  rate  from  N  to  E  or  W,  and  180  the  same  to  S;  or  one 
for  each  degree  of  the  circle  traversed. 

Now,  if  no  restriction  is  placed  on  competition,  the  eastern 
route  will  not  only  compete  with  the  western  at  S,  but  clear 
around  to  W ;  and  while  it  could  not  hope  with  its  longer  distance 
to  do  a  very  large  share  of  the  business,  yet  it  might  get  some  re- 
munerative employment  for  idle  cars  and  engines  in  a  dull  season. 
But  it  could  not  charge  more  than  90  for  the  service,  perhaps  not 
even  quite  so  much,  for  its  service  would  be  much  slower  than 
that  of  the  western  route,  let  us  say  87.  Similarly,  too,  will  the 
western  route  compete  for  freight  from  N  to  E  through  S  at  87. 

Now  let  it  be  declared  illegal  to  charge  more  for  the  shorter 
haul  than  for  the  longer,  and  what  will  be  the  result? 

As  a  penalty  for  engaging  in  the  competitive  business  to  E  and 
W  each  road  must  reduce  its  rates  at  S  from  180  to  90  or  87,  as 
well  as  all  other  rates  at  intermediate  stations  which  exceed  87. 
Neither  road  could  afford  to  give  up  a  large  business  at  average 
rates  for  a  smaller  business  over  a  longer  line  and  at  a  reduced 
rate ;  so  it  would  simply  withdraw  from  the  long  haul  business, 
and  would  enjoy  a  monopoly  of  what  it  had  the  short  haul  on.  As 
before  stated,  this  might  be  a  blessing  rather  than  a  calamity,  so 
far  as  the  railroads  alone  are  concerned ;  but  it  is  absurd  to  sup- 
pose that  this  country  will  permanently  put  any  such  penalty 
upon  railroad  competition. 

It  may  be  objected  that  no  two  single  roads  overlap  each  other, 
as  in  the  figure  suggested  above.  But  by  their  innumerable  con- 
nections working  with  them  as  through  lines,  nearly  all  competing 
lines  do  overlap  and  intersect  and  interlace  in  even  a  far  more 
complicated  manner. 

So  in  conclusion  it  may  be  stated  briefly  that  every  case  of  com- 
petition of  routes  has  its  essential  principles  perfectly  illustrated 
in  the  figure  suggested  above,  and  every  case  of  competition  of 
products  and  of  markets  has  its  principles  perfectly  illustrated  in 
the  old  proverb  that  it  is  labor  lost  to  carry  coals  to  Newcastle. 
And  the  single  underlying  principle  of  the  whole  business  and  of 
all  railroad  rates  is  that  they  must  be  principally  based  on  the 
value  of  the  service  and  not  on  its  cost.  And  when  the  value  of 
any  longer  haul  is  less  than  that  of  a  shorter  from  the  competition 
either  of  routes,  of  markets  or  of  products,  then  the  essential  con- 
ditions and  circumstances  are  different,  and  the  lesser  rate  for  the 
longer  haul  is  not  only  justifiable  but  necessary. 

Savannah,  Ga. 


THE  TREATMENT  OE  RAILROAD  EMPLOYES. 

By  Mr.  B.  B.  Adams,  Jr., 

Associate  Editor  of  The  Railroad  Gazette. 

It  may  be  assumed  that  the  Editor  of  The  Independent,  in  as- 
signing to  me  the  above-mentioned  topic,  phrased  as  it  is,  was 
actuated,  more  or  less,  by  the  feeHng  that  railroad  corporations  do 
not  always  treat  every  employe  as  well  as  he  deserves.  Such  a 
feeling  exists,  and  it  is  widespread.  There  is  often  good  founda- 
tion for  it,  as  every  railroad  manager  knows ;  but  I  am  bound  to 
say,  in  passing,  that  one  of  the  most  mischievous  features  of  the 
matter  is  the  false  notion  concerning  railroad  men's  troubles  that 
is  propagated  by  the  daily  newspapers.  Impelled  apparently  by 
the  motive,  perhaps  laudable,  to  give  large  space  in  the  reading 
columns  to  affairs  which  interest  the  most  numerous  class  of  read- 
ers— that  is,  the  "workingmen" — the  editors  print  ten  times  as 
much  of  the  gossip  and  small  talk  of  enginemen  and  brakemen  as 
the  subject  deserves ;  and  the  reader,  even  when  he  discerns  the 
true  "  thinness  "  of  the  alleged  news,  is  unconsciously  affected  by 
its  reiteration  day  after  day.  He  magnifies  the  railroader's  woes 
in  spite  of  himself. 

On  our  main  question.  What  do  the  corporations  give  their^men 
for  the  work  performed,  and  how  do  the  officers  behave  in  giving 
it?  no  general  statement  can  be  made,  for  different  corporations 
follow  different  theories.  The  "treatment"  of  workmen  always 
includes  wages  and  other  things.  This  is  particularly  true  in  the 
railroad  service.  Free  rides  when  off  duty,  and  free  rides  for  his 
family,  are  important  elements  in  nearly  every  railroad  man's 
treatment,  whether  he  expressly  acknowledges  the  fact  or  not. 
On  a  freight  train  the  pay  is  generally  by  the  trip,  and  the  num- 
ber of  trips  a  week  or  the  skill,  or  lack  of  skill,  with  which  the 
trainmaster  makes  the  hours  favorable  may  often  be  as  important 
as  would  be  a  five  per  cent  change  in  wages.  Railroads  often 
overlook  or  lightly  punish  blunders  involving  large  money  losses 
which,  in  other  employments,  the  workman  would  have  to  settle 
for.  And  these  elements,  which  can  be  measured  in  money,  are 
often  less  important  than  methods  of  discipline,  which  cannot  be 

Reprinted  by  permission  from  The  Independent  of  October  6,  1892. 


204  TREATMENT  OF  RAILROAD  EMPLOYES. 

thus  measured.  A  foreman  who  will  not  grant  a  furlough  without 
seeming  to  convey  an  invitation  to  hand  in  your  resignation,  or  a 
superintendent  who  shows  by  his  manner  that  he  will  find  an  ex- 
cuse for  discharging  you  if  you  appeal  to  the  president  from  a  de- 
cision of  his,  may  make  life  such  a  burden  that  it  is  better  to  leave 
the  road.  A  president  who  promises  to  consider  an  application 
for  higher  pay,  but  who  takes  six  months  in  which  to  prepare  his 
answer,  may  do  more  harm  than  another  man  would  by  an  actual 
reduction  of  wages. 

Why  do  people  ever  think  that  railroad  men  are  ill-treated? 
Well,  they  see  that  many  station  men  have  hard  work,  that  tele- 
graph operators  have  to  work  long  hours,  that  trainmen  are  often 
killed  or  injured,  that  many  in  all  these  classes  seem  to  be  less 
intelligent  and  well-to-do  than  their  occupations  would  lead  one 
to  expect  them  to  be ;  and  every  now  and  then  some  trainmen  or 
laborers  strike.     Wherein  is  the  employer  to  blame? 

The  greatest  fault  of  the  corporations  is  that  they  do  not  prop- 
erly train  their  men,  but  leave  them  to  train  themselves.  The 
responsibilities  of  a  locomotive  runner,  a  brakeman  or  a  telegraph 
operator  are  serious  and  important ;  and  if  the  companies  made  it 
a  rule  to  fill  these  places  only  with  men  who  thoroughly  appreci- 
ated those  responsibilities  they  would  raise  the  grade  of  intelli- 
gence, would  incidentally  be  forced  to  pay  higher  wages,  and 
would  silence  many  complaints.  A  man  trying  to  fill  a  larger 
place  than  he  is  competent  for  has  a  natural  tendency  to  a  state  of 
dissatisfaction,  for  he  has  not  comprehended  his  surroundings. 

Railroad  managers  are  noted  for  their  shortsighted  policies.  In 
the  worst  cases  they  will  let  the  track  get  into  a  dangerous  state 
of  disrepair,  so  that  the  published  profits  can  be  made  large 
enough  to  favor  the  speculations  of  the  directors  in  Wall  street. 
The  officers  know  that  a  settling  time  will  surely  come ;  that  the 
track  must  be  repaired  some  time ;  but  they  shut  their  eyes  to 
the  future.  This  shortsightedness  affects  all  departments  and  has 
a  marked  influence  in  many  otherwise  good  companies.  A  just 
demand  for  more  pay  or  easier  work  is  staved  off,  in  the  hope  that 
next  year  it  will  be  easier  to  meet  it. 

Railroads  do  not  deal  frankly  with  their  men.  A  railroad  cor- 
poration is  a  public  concern  and,  its  affairs  being  matters  of  public 
discussion,  the  employes,  who  are,  of  course^  always  wanting  bet- 
ter pay,  have  a  right  to  be  told  just  why  the  company  is  too  poor 
to  comply  with  their  wishes.  In  1890  the  Erie  road,  in  answering 
a  loud  complaint  from  certain  employes,  issued  to  them  a  most 
carefully  prepared  pamphlet  setting  forth  just  why  the  wages 
could  not  be  increased,  and  the  employes  were  sensible  enough  to 
accept  the  argument.  Such  a  statement,  in  substance,  should  be 
made  every  year  or  half  year  and  every  dissatisfied  employe  should 
not  only  receive  it  but  be  made  to  grasp  its  meaning.  The  earn- 
ings, expenses,  rise  or  fall  of  rates  and  prospects  for  the  future 


TREATMENT  OF  RAILROAD  EMPLOYES.  205 

could  and  should  be  stated  so  that  a  schoolboy  could  understand 
them.  It  would  not  be  easy  at  first,  but  perseverence  would  ac- 
complish good  results.  But  this,  if  done  honestly,  involves  a  de- 
gree of  publicity  that  many  directors  shrink  from.  They  do  not 
want  to  expose  the  real  state  of  their  finances  even  to  the  stock- 
holders, much  less  to  the  employes. 

When,  from  the  accumulated  grievances  of  years,  or  the  evil  in- 
fluence of  new  employes  who  are  natural  "  agitators, "  a  strike 
actually  impends,  the  most  conspicuous  fault  of  the  railroad  com- 
pany is  narrow-mindedness.  The  directors  do  not  seem  to  realize 
that  their  possession  of  superior  wealth  and  intelligence  places 
the  employes  at  a  disadvantage,  and  the  rights  of  the  company 
are  maintained  as  strenuously  as  if  the  contest  were  with  an  equal. 
It  is  true  that  the  employes  might  select  an  advocate  as  wise  and 
shrewd  as  the  railroad  president,  but  generally  they  do  not ;  and 
their  fatuity  must  be  taken  into  consideration  by  the  employer  if 
he  would  merit  the  approval  of  public  opinion.  I  am  not  speaking 
now  of  raising  or  reducing  wages,  but  of  the  manner  of  conducting 
negotiations.  An  employe  has  no  right  to  send  a  brotherhood 
chief  to  argue  with  the  superintendent ;  but  he  most  certainly  has 
a  right  to  send  an  individual  advocate,  and  superintendents  have 
often  made  the  mistake  of  refusing  an  audience  to  a  man  on  this 
distinction  when  they  would  have  made  money  had  they  ignored 
it ;  and  with  proper  tact  they  need  not  have  sacrificed  any  princi- 
ple. The  two  greatest  railroad  strikes  of  the  last  five  years,  that 
on  the  Chicago,  Burlington  &  Quincy  in  1888  and  that  on  the  New 
York  Central  &  Hudson  River  in  1890,  are  held  by  competent 
judges  to  have  been  precipitated  by  a  lack  of  suavity  in  the  vice- 
presidents  who  treated  with  the  complainers.  These  strikes  cost 
two  or  three  million  dollars  each.  The  shortsightedness  of  direc- 
tors, referred  to  above,  keeps  the  salaries  of  officers  too  low,  so 
that  this  same  lack  of  tact  is  found  among  the  division  superin- 
tendents who  conduct  the  every-day  dealings  with  the  men.  A 
succession  of  small  irritations  aggravates  the  final  one. 

All  these  things  are  common  enough  to  justify  the  existence, 
among  many  fair-minded  people,  of  the  feeling  that  railroad 
'*  labor  "  is  often  unfairly  dealt  with ;  but  let  us  look  for  a  moment 
at  the  other  side  of  the  shield.  On  many  railroads  the  service  is 
conducted  so  smoothly  that  the  public  seldom  hears  of  any  trouble. 
On  all  roads  the  disturbances  are  among  the  freight  conductors 
and  brakemen  almost  exclusively.  This  class  includes  the  so- 
called  '*  switchmen."  The  station  agents  and  many  other  classes 
never  strike,  tho'  their  pay  is  smaller,  in  proportion  to  the  skill 
demanded,  than  that  of  train  men.  The  passenger  train  men  gen- 
erally do  not  join  the  freight  men.  * 

*  If  there  is  any  class  which  the  companies  do  misuse  without  excuse  it  is  the  shopmen. 
These,  located  in  country  towns,  remote  from  the  large  cities  where  other  work  in  their 
line  is  obtainable,  sometimes  have  their  pay  suddenly  reduced  in  winter  in  order  that  the 
expenses  may  be  kept  down  to  some  arbitrary  limit,  when  the  company,  having  plenty  of 
repair  work  on  hand,  ought  to  keep  them  at  work  at  regular  pay,  even  at  a  slight  financial 
sacrifice. 


2o6  TREATMENT  OF  RAILROAD  EMPLOYES. 

The  Pennsylvania  road  rarely  has  a  strike.  It  has  an  insurance 
department  through  which  the  company  grants  the  employes 
actual  gratuities  of  $100,000  or  $200,000  a  year,  besides  affording 
incidental  benefits.  The  Baltimore  &  Ohio  has  a  similar  depart- 
ment, older  than  the  Pennsylvania's.  The  Chicago,  Burlington  & 
Quincy  and  the  Philadelphia  &  Reading  have  started  these  de- 
partments. The  Boston  &  Albany  and  other  roads,  employing 
5,000  to  10,000  men  each,  have  had  no  strike  of  any  consequence 
in  many  years.  A  number  of  prominent  companies  pay  premi- 
ums to  the  foremen  of  track  repairs.  The  Fall  Brook  Railroad 
pays  premiums  to  the  freight  conductors. 

The  narrow-mindedness  of  railroad  officers  is  largely  owing  to 
their  uncertain  tenure  of  office.  Strictly  speaking,  they  are  inex- 
perienced. From  the  comparative  newness  of  the  country  or  the 
rushing  times  we  are  living  in,  the  directors  do  not  succeed  in  get- 
ting first-class  officers  and  in  keeping  them.  Superintendents  as- 
sume an  air  of  infallibility  and  yet  make  false  moves  and  have  to 
retreat,  weakening  the  respect  of  their  men.  A  railroad  superin- 
tendent does  not  fit  his  place  until  he  has  held  it  a  year  or  two. 
These  conditions  are  partly  due  to  the  old  trouble  that  directors 
do  not  direct.  A  railroad  president,  general  manager  or  superin- 
tendent, if  he  does  all  required  of  him,  generally  does  two  or 
three  men's  work.  Small  corporations  have  been  consolidated 
into  large  ones,  so  that  the  manager  has  to  deal  with  his  men  at 
long  range.  The  consolidating  process  has  gone  on  so  rapidly, 
owing  partly  to  unfair  legislation,  that  methods  of  discipline  have 
not  been  properly  adjusted  to  the  new  conditions.  At  present 
employes  of  small  roads  are  often  treated  better  than  those  of 
large  ones. 

Managers  are  loth  to  be  frank  with  their  men,  because  the  men 
employ  such  rank  demagogues  or  such  young  novices  as  spokesmen. 
Ten  thousand  good  men  will  quickly  acquiesce  in  the  action  of  one 
hundred  of  their  unreflecting  fellows  in  empowering  a  half-dozen 
agitators  to  make  impudent  threats  to  the  officers.  The  ten  thous- 
and may  not  actually  join  in  a  strike,  but,  feeling  that  they  have 
little  to  lose,  will  tacitly  encourage  the  most  reckless  agitators. 
Both  the  reckless  and  those  not  reckless  make  demands  much 
laiger  than  they  expect  to  enforce,  which  is  always  dangerous  for 
any  one  not  skilled  in  sophistical  arts.  When  an  overbearing  offi- 
cer has  to  explain  a  strike,  he  always  proves  that  the  employes 
were  more  unreasonable  than  himself. 

Railroads  which  keep  wages  down  so  as  to  keep  profits  up  are 
generally  sincere.  If  profits  are  not  satisfactory  stockholders  will 
sell  their  stock,  the  price  of  it  will  fall,  the  company  cannot  bor- 
row money,  expensive  improvements  of  the  road  are  postponed, 
and  the  public  suffers  for  the  lack  of  them ;  and  any  lawful  means 
to  prevent  this  is  deemed  not  only  right  but  praiseworthy.  To 
pay  men  better  wages  and  keep  up  improvements,  the  road  must 


TREATMENT  OF  RAILROAD  EMPLOYES. 


207 


have  a  good  income.  It  must  get  the  money  before  it  can  spend 
it.  But  good  earnings  at  once  prompt  the  legislator  to  demand  a 
reduction  of  rates  and  fares  before  the  road  is  improved.  The 
training  of  the  men,  which  the  companies  neglect,  is  bound  up  in 
the  question  of  wages.  They  get  as  good  men  as  they  feel  able 
to  pay  for. 

As  intimated  at  the  outset,  a  general  statement  is  hard  to  make, 
and  dangerous;  but,  broadly  speaking,  we  may  say  that  those 
companies  which  do  have  trouble  with  their  men  are  more  to 
blame  than  the  men  are.  The  defense  of  the  companies,  which  I 
have  just  outlined,  does  not  quite  meet  the  arraignment.  As  long 
as  some  companies  get  along  without  trouble  the  burden  of  proof 
is  on  those  which  do  have  trouble  to  show  why  they  do  not  avoid 
it.  Those  companies  which  spend  more  money  for  wages,  and 
which  employ  superintendents  who  know  how  to  treat  subordinates 
just  right  (this  also  implies  increased  expenditure),  are  satisfied 
with  the  financial  results  of  their  policy.  The  vital  difference  be- 
tween these  and  the  shortsighted  companies  is  that  the  latter  will 
not  ivait  long  enough  for  their  profits.  Improvements  in  service 
do  not  return  a  profit  until  they  have  been  in  use  some  time.  Un- 
just restrictions  imposed  by  the  state  should  be  regarded  by  a  cor- 
poration as  a  misfortune,  to  be  borne  as  best  it  can  be.  What 
justification  is  there  for  shifting  the  burden  to  the  shoulders  of 
the  employes?  The  capitalist,  who  sees  nothing  but  his  capital 
and  the  immediate  returns  upon  it,  will  dispute  me  here.  When 
Iowa  reduced  wages  by  law,  the  boast  was  made  on  behalf  of  the 
companies,  that  employes'  wages  would  be  reduced  in  that  state. 
In  some  cases  the  threat  was  doubtless  carried  out,  in  effect,  if 
not  visibly ;  but  the  companies  were  morally  bound  to  show  the 
justice  of  their  act,  for  they,  and  not  the  employes,  took  the  risk 
of  adverse  legislation. 

Sir  George  Findlay,  General  Manager  of  the  London  &  North- 
western, a  fair-minded  man  of  great  experience,  has  lately  said : 

' '  The  true  preventive  of  strikes  is  to  be  found  in  the  cultivation  of  a  good 
understanding  between  the  men  and  their  employers,  and  in  the  establish- 
ment  of  sick,  accident  and  benefit  funds  fostered  and  assisted  by  the  directors, 
so  as  to  show  that  the  employers  take  as  great  an  interest  in  their  moral  and 
material  welfare  as  a  private  employer  would  do  in  the  case  of  valued  servants." 

The  dozen  words  that  I  have  italicized  contain  the  gist  of  the 
matter ;  and  that  is  the  only  hopeful  remedy  for  the  defects  I  have 
enumerated.  A  "good  understanding"  would  lead  employes  to 
put  up  with  the  inevitable,  and  employers  to  redress  grievances 
in  their  incipiency.  Arbitration  is  of  no  value  in  dealings  between 
a  corporation  and  its  employes,  because  the  employes  can  give  no 
bond  that  they  will  abide  by  the  decision  of  the  arbitrators.  The 
irresponsible  character  of  the  brotherhoods  is  the  reason  that  rail- 
roads cannot  make  binding  agreements  with  them  on  any  point. 

There  are  indications  that  the  brotherhoods,  whose  rashness  has 


2o8  TREATMENT  OF  RAILROAD  EMPLOYES. 

been  the  cause  of  the  worst  railroad  strikes,  are  growing  wiser. 
Conservative  leaders  seem  to  be  in  more  favor  than  they  were  a 
few  years  ago.  Sweeney,  whose  weakness  was  so  conspicuous  at 
Buffalo,  is  probably  not  a  fair  sample  of  the  brotherhood  leader 
today.  Mr.  Arthur,  leader  of  the  locomotive  engineers,  probably 
the  wisest  trade-union  leader  in  this  country,  has  set  an  example 
which  the  others  seem  to  be  emulating.  The  railroad  managers 
are  also  improving.  Conciliatory  tactics  are  growing  in  favor. 
Several  roads  have  recently  raised  the  wages  of  telegraph  opera- 
tors at  the  request  or  demand  of  their  brotherhood.  One  of  the 
chief  dangers  now  seems  to  be  that  requests  for  additional  pay 
will  be  granted  without  proper  reflection,  simply  to  avoid  or  post- 
pone a  conflict.  Advances  in  pay  ought  to  be  made  discriminat- 
ingly, by  the  superintendent  or  other  officer  who  is  familiar  with 
the  men  and  their  respective  abilities.  To  give  more  pay  without 
getting  better  service  is  an  expedient  of  doubtful  value. 
New  York  City. 


THE  BROTHERHOOD  OE  ENGINEERS  AND  ITS 
RELATION  TO  THE  RAILROADS. 

By  Mr.  Nat  Sawyer, 

Locomotive  Engineer  on  the  New  York  Central  and  Hudson  River  Railroad. 

The  Grand  International  Brotherhood  of  Locomotive  Engineers 
was  instituted  at  Detroit,  Mich.,  August  17th,  1863,  its  name  at  that 
time  being  "The  Brotherhood  of  the  Footboard."  (The  ''foot- 
board "  is  the  platform  upon  which  the  engineer  and  fireman  of  a 
locomotive  stand.)  The  Order  was  reorganized  at  Indianapolis, 
Ind.,  August  17,  1864,  as  the  Brotherhood  of  Locomotive  Engi- 
neers.    There  are  about  30,000  members  of  the  Order. 

No  person  can  become  a  member  of  the  Brotherhood  unless  he 
is  a  white  man,  is  twenty-one  years  of  age,  can  read  and  write,  is 
a  man  of  good  moral  character,  of  temperate  habits,  is  a  locomo- 
tive engineer  in  good  standing,  and  in  active  service  as  such  when 
proposed.  He  must  also  have  had  at  least  one  year's  experience 
as  an  engineer.  Each  division  of  the  Order  is  to  be  the  judge  of 
what  constitutes  one  year's  experience. 

One  peculiar  and  stringent  rule  of  the  Brotherhood  is  that  none 
of  its  members  are  allowed  to  join  any  other  labor  organization 
under  penalty  of  expulsion.  If  a  proposed  member  does  belong 
to  any  other  labor  organization,  he  may  be  balloted  for ;  but,  if 
elected,  he  cannot  be  initiated  until  satisfactory  evidence  is  shown 
that  he  has  withdrawn  from  such  organization.  No  candidate  can 
be  initiated  while  there  is  a  strike  on  the  road  on  which  he  is 
employed. 

The  influence  or  sympathy  of  the  Brotherhood,  as  a  body,  is 
not  allowed  to  be  enlisted  or  used  in  favor  of  any  political  or  re- 
ligious organization  whatever,  and  political  or  religious  discus- 
sions are  not  permitted  at  any  of  the  meetings. 

If  a  brother  has  conducted  himself  in  a  manner  unbecoming  a 
man,  and  which  may  be  calculated  to  bring  disgrace  upon  the 
Brotherhood,  or  is  guilty  of  drunkenness,  or  keeping  a  saloon 
where  intoxicating  liquors  are  sold,  or  is  engaged  in  the  traffic  of  in- 
toxicating liquors,  or  joins  a  secret  detective  organization,  a  com- 
mittee is  appointed  to  examine  the  charges,  and,  if  they  are  found 

Reprinted  by  permission  from  The  Independent  of  June  i,  1893. 

14 


2IO  BROTHERHOOD  OF  ENGINEERS. 

true,  he  is  expelled.  He  is  also  subject  to  the  same  penalty  if  he 
neglects  his  duty,  or  injures  the  property  of  his  employer,  or  en- 
dangers the  lives  of  persons  willfully,  while  under  the  influence  of 
liquor,  or  otherwise. 

During  the  last  month,  for  instance,  according  to  the  official  re- 
cord, members  were  expelled  from  the  order  for  the  following 
causes :  non-payment  of  dues  and  assessments,  intoxication,  unbe- 
coming conduct,  violating  obligations,  keeping  saloon,  deserting 
family,  "dead  beat,"  defrauding  Division,  defrauding  a  Brother, 
etc. 

Each  member  is  provided  with  a  traveling  card,  by  which  his 
identity  can  be  established  in  other  Divisions  than  his  own ;  but 
he  is  not  allowed  to  use  it  for  commercial  purposes,  under  penalty 
of  expulsion. 

In  case  of  the  death  of  a  Brother  in  good  standing  a  committee 
is  appointed  to  inquire  into  the  pecuniary  condition  of  the  family 
of  the  deceased.  Should  the  committee  report  that  they  are  in 
want  of  assistance,  it  is  made  the  duty  of  every  member  of  the 
Division  to  see  that  they  are  assisted  by  all  honorable  means ;  that 
the  children,  if  there  be  any,  are  not  allowed  to  suffer  or  be  ne- 
glected, and  the  members  extend  over  them  their  protection  and 
care  so  long  as  they  may  stand  in  need  of  it.  The  widow  is  assist- 
ed in  every  way  which  may  be  deemed  proper.  It  is  made  the 
duty  of  each  member  of  the  Division  to  use  every  effort,  consist- 
ent with  the  rules  of  propriety,  to  prevent  her  from  coming  to 
destitution  or  disgrace ;  they  must  treat  her  with  respect  and  con- 
sideration so  long  as  she  may  prove  herself  worthy. 

It  is  not  generally  known  that  the  Brotherhood  has  a  special 
funeral  service  of  its  own,  which  takes  place  at  the  grave.  It  may 
be  interesting  to  reproduce  the  opening  remarks,  read  by  the 
chaplain  or  chief  engineer  : 

"Again  are  we  assembled,  in  accordance  with  an  established  custom  of  the 
Brotherhood  of  Locomotive  Engineers,  to  pay  the  last  sad  tribute  of  respect 
and  esteem  to  the  memory  of  our  Brother,  who,  when  in  health  and  strength, 
deemed  it  not  only  a  duty  but  a  privilege  to  contribute  whatever  he  possessed 
of  influence,  of  talent  or  of  strength  to  the  elevation  of  the  character  and  stand- 
ing of  the  profession  to  which  he  had  devoted  the  best  years  of  his  life,  and 
who  always  remembered  that  while  his  first  obligation  was  to  God  and  those 
whom,  in  His  infinite  mercy,  had  been  made  dependent  upon  him,  a  no  less 
binding  obligation  made  it  his  duty  to  seek  to  elevate  and  purify  the  organi- 
zation of  which  he  was  an  honored  member," 

The  closing  prayer  in  the  services  is  as  follows : 

"Our  Father  who  art  in  Heaven,  hallowed  be  Thy  name;  Thy  kingdom 
come.  Thy  will  be  done  on  earth  as  it  is  in  Heaven ;  give  us  this  day  our  daily 
bread,  and  forgive  us  our  debts  as  we  forgive  our  debtors ;  lead  us  not  into 
temptation,  but  deliver  us  from  evil, 

'  'And  we  further  ask  Thee  to  let  Thy  special  blessing  rest  upon  the  relatives 
of  our  deceased  Brother;  comfort  them,  we  pray  Thee,  in  this  hour  of  afflic- 
tion ;  may  they  not  mourn  as  those  without  hope. 

"  May  the  blessing  of  Heaven  rest  upon  us,  and  the  cement  of  brotherly 


BROTHERHOOD  OF  ENGINEERS.  21 1 

love  unite  us  together  while  here  on   earth,  so   that  when   we   are   called  by- 
death's  relentless  hand,  we  may  be  found  worthy  to  be  admitted  into  Thy  King- 
dom above.     Amen. 
Response. — So  mote  it  be." 

A  strong  feature  of  the  Brotherhood  is  an  insurance  system. 
Policies  are  issued  for  $1,500,  $3,000  and  $4,000.  The  loss  of  a 
leg,  an  arm,  or  a  total  loss  of  sight  entitles  the  holder  of  the  policy 
to  the  full  amount  of  his  insurance.  There  is  also  a  widows'  and 
orphans'  fund,  the  donations  for  which  at  the  last  convention 
amounted  to  $16,000.  There  is  also  in  the  Brotherhood  a  regularly 
organized  lodge  of  ladies  who  render  valuable  assistance  in  case  of 
sickness  or  distress  in  the  families  of  deceased  members. 

"Vh.^  Journal  of  the  Brotherhood  of  Locomotive  Engineers ^  pub- 
lished at  Cleveland,  Ohio,  is  the  official  organ  of  the  Brotherhood. 
It  is  a  magazine  of  about  one  hundred  pages  of  the  standard  size, 
and  is  issued  monthly.  It  contains  a  list  of  the  general  and  local 
officers  of  the  Brotherhood,  scientific  articles  in  regard  to  locomo- 
tives, railway  law,  correspondence  on  engineering  and  labor  mat- 
ters of  current  interest,  a  story,  poems  and  sketches  for  the  benefit 
of  the  lady  readers,  and  personal  items  about  members  of  the 
order  who  are  expelled,  suspended,  reinstated  or  have  withdrawn 
from  membership. 

In  regard  to  the  policy  of  the  order,  I  believe  there  is  a  gen- 
eral desire  on  the  part  of  engineers  to  foster  a  spirit  of  good  feel- 
ing toward  the  railroad  companies ;  in  fact,  it  is  to  their  interest 
so  to  do.  Of  course  there  are  radicals  in  every  organization,  men 
who  are  never  satisfied  with  any  course  of  action,  but  the  conser- 
vatives far  outnumber  the  radicals  and  dictate  the  policy  that  is  to 
be  pursued.  P.  M.  Arthur,  the  Grand  Chief  of  the  Brotherhood, 
is  a  conservative  man,  so  is  Mr.  Sargent,  of  the  Firemen's  Brother- 
hood. Personally,  I  have  always  been  a  conservative,  and  I  think 
the  conservative  element  will  always  prevail  in  the  Brotherhood. 
We  believe  that,  as  a  rule,  the  railroad  companies  treat  us  fairly, 
especially  the  large  trunk  lines ;  but  the  smaller  roads  are  some- 
times open  to  criticism. 

The  Brotherhood  of  Locomotive  Engineers  has  less  trouble  than 
any  other  labor  organization  with  its  employers.  One  reason  is 
because  any  agreement  the  men  make  with  the  company  they 
carry  out  to  the  letter.  Our  organization  can  be  depended  upon 
to  live  up  to  its  promises.  The  railroad  companies  have  found 
this  out,  and  the  consequence  is  that,  generally  speaking,  it  has 
fostered  a  spirit  of  good  feeling  between  the  organization  and  the 
companies. 

And  I  believe  that  the  railroad  companies  look  at  the  question 
of  their  relation  to  their  employes  in  the  same  way ;  that  they 
really  want  to  foster  good  feeling,  and  desire  to  pay  the  men  fair 
living  wages.  This  is  especially  the  case  on  the  New  York  Cen- 
tral. The  men  on  this  road  have  no  better  friends  than  the  three 
principal  executive  officers,  H.  Walter  Webb,  the  third  vice  pres- 


212  BROTHERHOOD  OF  ENGINEERS. 

ident ;  John  M.  Toucey,  the  general  manager ;  and  William  Buch- 
anan, the  superintendent  of  power  and  rolling  stock.  The  famous 
strike  on  the  New  York  Central  in  1890  was  not  won  by  the  rail- 
road as  such ;  it  was  won  on  the  personality  of  these  officers  I  have 
named.  The  engineers  desired  to  show  their  gratitude  for  the 
many  acts  of  kindness  they  had  received  from  them  in  the  past, 
and  they  stood  by  the  company. 

The  subjects  in  dispute  between  a  railroad  company  and  the 
Brotherhood  generally  refer  to  long  hours  on  duty  and  under  pay- 
ment for  overtime.  We  will  say  that  twelve  hours  constitute  a 
day's  work.  For  any  work  over  that  time  the  engineer  wants 
thirty-five  cents  an  hour.  This  demand  is  conceded  on  large 
roads  like  the  New  York  Central,  but  some  of  the  smaller  roads 
refuse  to  pay  the  extra  charge. 

Generally,  throughout  the  country,  the  regular  *hours  of  labor 
are  calculated  to  be  ten  hours ;  but  for  two  hours  overtime  (mak- 
ing twelve  hours  in  all),  the  men  will  receive  thirty-five  cents  an 
hour  if  they  are  laid  off  at  a  terminal  point;  i.  e.,  if  they  are  not 
able  to  get  back  to  the  starting  point  with  their  train. 

After  a  man  is  promoted  to  run  an  engine  he  receives,  during 
the  first  year,  $2.50  a  day,  and  a  pro  rata  mileage  of  2^  cents  a 
mile.  The  second  year  he  receives  $3  a  day,  with  a  pro  rata  of 
three  cents,  over  one  hundred  miles.  The  third  year  he  is  paid 
$3.50  a  day  and  a  pro  rata  of  3^  cents  for  all  over  one  hundred 
miles. 

On  a  road  where  there  is  a  good  freight  business  the  men  will 
make  about  $125  a  month  on  that  kind  of  traffic.  The  engineers 
running  passenger  trains  will  average  about  $140  a  month.  But 
the  engineer  who  runs  the  fast  express  train  to  Chicago  will  re- 
ceive no  more  than  the  one  who  runs  a  slow  train.  As  a  matter 
of  fact,  the  engineer  who  runs  the  Chicago  express  has  the  easiest 
job,  because  he  is  bound  to  have  a  clear  road  on  which  to  run  his 
train. 

A  strike  is  ordered  on  a  railroad  in  this  way :  There  has  been  a 
disagreement  between  some  engineers  and  the  company.  We  will 
say  that  the  local  committee  of  the  Brotherhood  of  the  Hudson 
River  Division,  another  on  the  Middle  Division,  and  another  on 
the  Western  Division  have  failed  in  their  efforts  to  bring  about  an 
agreement.  They  then  notify  the  General  Committee  of  the 
Brotherhood,  which  is  called  together  and  which  consults  with  the 
highest  official  of  the  road.  If,  after  a  conference,  they  fail  to 
come  to  an  understanding,  the  Grand  Chief  of  the  Brotherhood  is 
sent  for.  His  first  question  is  ' '  Have  you  exhausted  all  your  ef- 
forts? "  If  the  answer  is  "No,"  he  telegraphs  back  that  he  will 
not  come ;  the  committee  must  continue  in  the  work.  If  they 
have  exhausted  all  their  efforts  he  comes.  If,  then,  he  gives  the 
men  permission  to  strike  they  can  strike,  and  the  Brotherhood 
supports  the  strike.     But  if  he  does  not  give  them  permission  and 


BROTHERHOOD  OF  ENGINEERS. 


213 


they  strike,  they  not  only  have  no  assistance  from  the  Brother- 
hood, but  are  liable  to  be  expelled  for  the  action  they  have  taken. 

But  I  will  say  here  that,  as  a  rule  if,  in  the  case  of  a  disagree- 
ment between  a  railroad  company  and  the  men,  the  men  go  the 
right  way  to  work  they  can  nearly  always  obtain  their  demands. 
I  was  chairman  of  the  local  committee  on  the  New  York  Central 
for  a  good  many  years.  I  have  often  seen  the  demands  of  the 
men  granted  when  they  have  been  presented  in  the  proper  way. 

I  am  asked  to  express  my  opinion  in  regard  to  the  Toledo  and 
Ann  Arbor  strike  in  the  west,  out  of  which  has  grown  an  impor- 
tant legal  question,  which  is  to  be  adjudicated  upon  by  the  United 
States  Supreme  Court.  People  have  seen  so  much  in  the  news- 
papers about  the  legal  proceedings  growing  out  of  the  trouble 
that  they  are  apt  to  lose  sight  of  the  original  cause  of  disagree- 
ment. As  usual  it  was  about  the  question  of  wages.  The  men 
on  the  freight  trains  were  paid  from  $3  to  $3.60  per  one  hundred 
miles,  fourteen  hours  constituting  a  day's  work.  The  $3.60  pay 
was  for  what  are  called  large  compound,  no-deck,  consolidated 
mogul  engines,  and  the  men  asked  for  this  class,  $3.70.  In  the 
passenger  service  the  men  were  paid  $2.45  per  100  miles.  They 
were  willing  to  meet  their  officials  in  this  whole  schedule  for  three 
cents  a  mile  on  passenger  and  $3.50  per  100  miles  on  freight.  No 
first-class  railroad  in  Michigan  pays  less  than  $3.50  for  freight  and 
passenger  service.  The  engineers  would  have  waived  the  point 
for  extra  compensation  for  the  large  no-deck  moguls,  if  they  had 
been  met  in  the  spirit  of  fairness,  and  would  have  cheerfully  ac- 
cepted an  honorable  compromise  rather  than  struck ;  but  the  Gen- 
eral Manager  would  not  listen  to  a  compromise  or  make  the  slight- 
est concessions,  nor  would  he  modify  an  order  recently  issued  that 
overtime  would  not  be  paid  engineers  and  firemen  until  after 
twenty-one  hours  continuous  service.  The  general  treatment  of 
the  men  had  been  very  bad.  Obnoxious  bulletins  were  constantly 
being  issued.  One  of  these  required  the  men  to  coal  their  engines 
after  the  trip  was  made,  and  no  excuse  was  taken  even  tho'  they 
had  been  on  duty  the  twenty-one  hours  demanded  by  the  company. 

A  boycott  grew  out  of  this  trouble  with  the  Ann  Arbor  railroad. 
This  boycott  was  passed  by  the  Brotherhood,  I  think,  in  1888.  It 
provided  that  wherever  there  was  a  strike  on  a  road  the  men 
would  refuse  to  haul  the  freight  cars  of  a  connecting  road,  when 
the  cars  of  the  road  with  which  they  had  trouble  were  attached  to 
the  trains  of  said  road.  It  is  allowable  to  haul  passenger  trains 
but  not  freight  trains.  I  think  that  rule  is  wrong,  and  I  believe 
Mr.  Arthur  is  of  the  same  opinion.  I  do  not  think  that  the  boy- 
cott should  ever  have  been  introduced  in  this  country.  It  has  no 
business  here,  and  it  is  a  wrong  method.  It  has  been  said  that 
Mr.  Arthur  has  made  the  remark:  "Take  away  the  privilege  of 
the  boycott  from  organized  labor  and  its  fight  against  capital  will 
be  futile."     I  do  not  think   Mr.  Arthur  made  that  remark,  and  I 


214  BROTHERHOOD  OF  ENGINEERS. 

base  my  judgment  on  the  fact  that  I  not  only  know  him  very  well, 
but  I  have  been  officially  associated  with  him  in  the  Brotherhood 
for  many  years.     In  the  Ann  Arbor  case,  if  the  officers  of  the  road  * 
had  treated  the  men  in  a  fair  spirit  there  would  have  been  no 
trouble. 

My  opinion  is  that  the  men  can  gain  more  by  arbitration  than 
by  the  use  of  the  stringent  measures  some  of  the  more  radical 
members  of  the  order  are  inclined  to  adopt.  The  decision  of 
Judge  Ricks  in  the  Ann  Arbor  case  is  what  I  expected  it  would  be. 
I  have  told  our  members  that  some  day  they  would  come  in  con- 
tact with  the  Interstate  Commerce  Law.  The  final  decision  of 
the  United  States  Supreme  Court  will  determine  the  rights  of 
labor  organizations  as  they  are  affected  by  this  law.  Of  course 
many  of  our  men  do  not  like  the  decision  of  Judge  Ricks,  because 
they  believe  it  prevents  them  from  enforcing  their  demand.  The 
whole  trouble  is  about  the  boycott.  I  do  not  think  that  belongs 
to  this  country ;  it  belongs,  if  anywhere,  on  the  other  side  of  the 
Atlantic.  I  do  not  believe  in  transplanting  the  isms  of  European 
workingmen,  anarchists,  etc. ,  into  this  country.  I  think  we  can 
take  care  of  the  interests  of  our  workingmen  without  borrowing 
methods  from  the  other  side. 

In  the  great  Missouri  Pacific  strike  in  1886,  Grand  Chief  Engi- 
neer Arthur,  of  our  Brotherhood,  was  denounced  by  Martin  Irons, 
the  leader  of  the  movement,  because  the  Brotherhood  would  not 
sanction  what  he  had  done.  Irons  endeavored  to  intimidate  the 
men  into  joining  the  Knights  of  Labor,  and  so  help  the  Knights 
in  their  strike.  But  Mr.  Arthur  went  to  St.  Louis  and  told  the 
men  that  they  must  obey  the  laws,  which  meant,  substantially, 
that  they  should  mind  their  own  business  and  let  other  people's 
alone. 

Irons  then  claimed  that  the  Brotherhood  did  not  sanction  the 
stand  Arthur  had  taken.  Soon  after  this  time  our  organization 
held  a  union  meeting  at  Scranton.  I  have  been  a  member  of  the 
executive  committee  for  a  good  many  years,  and  have  always  been 
an  admirer  of  the  Grand  Chief.  On  that  occasion  I  offered  the 
following  resolution,  which  was  adopted  unanimously,  was  pub- 
lished in  our  official  journal,  and  by  newspapers  generally  through- 
out the  country : 

'■'Resolved,  That  we,  as  the  representatives  of  the  Brotherhood  of  Locomo- 
tive Engineers,  assembled  in  union  meeting  in  the  city  of  Scranton, 
Penn.,  Sunday,  September  6th,  1886,  do  at  this  time  express  to  our  Grand 
Chief  Engineer,  P.  M.  Arthur,  our  strong  and  decided  approval  of  his  actions 
in  the  recent  labor  troubles  in  the  Northwest  and  Southwest,  and  we  say  to 
him :  '  Continue  in  the  fight  as  you  have  in  the  past,  as  every  act  of  yours  has 
given  entire  satisfaction  to  every  loyal  member  of  this  Brotherhood,  regardless 
of  the  statements  of  the  labor  demagogs  to  the  contrary — viz. ,  that  your  action 
did  not  meet  the  approval  of  the  Brotherhood.  The  entire  Brotherhood,  we 
say,  is  adhering  to  the  agreements  with  your  several  companies.  Carry  out 
the  compact  to  the  letter,  and  if  the  agreement  is  broken  let  it  not  be  said  you 
were  the  first  to  break  it. 


BROTHERHOOD  OF  ENGINEERS.  215 

"  '  Do  your  duty,  regardless  of  the  intimidations  and  threats  of  any  organi- 
zations in  existence,  and  remembering  our  motto,  We  amalgamate  with 
none.' " 

When  it  is  asked,  How  will  the  men  enforce  their  demands  in 
the  future?  it  must  be  remembered  that  the  large  railroad  com- 
panies have  never  yet  said,  absolutely,  that  they  would  not  make 
any  concessions  to  the  men.  As  I  have  already  said,  if  men  go 
about  it  in  the  right  way  to  secure  their  demands,  if  they  have  the 
right  kind  of  leaders  to  handle  the  matter  each  time,  they  cannot 
help  but  gain  something. 

It  is  asked,  * '  What  will  the  Brotherhood  do  in  case  the  decision 
of  Judge  Ricks  is  sustained?  "  The  public  may  rest  assured  that 
the  Brotherhood  will  stand  by  the  laws  of  the  land  and  obey  them 
to  the  letter.  It  must  be  understood  that  they  are  not  going  to 
incite  a  conflict  between  their  organization  and  the  United  States 
Government.  At  a  meeting  of  our  order,  held  at  Schenectady  a 
few  days  ago,  Mr.  Arthur  said:  "This  Brotherhood  will  obey 
any  law  of  this  country." 

New  York  City. 


THE  NECESSITY  TOR  RAILWAY  COMPACTS 
UNDER  GOVERNMENTAL  REGULATION. 

By  Mr,  James  Peabody. 

Editor  of  The  Railway  Review. 

The  Student  of  railway  problems  finds  himself  at  the  outset  con- 
fronted by  a  labyrinth  of  vast  proportions  through  which  no  well- 
defined  highways  have  been  marked  out,  but  only  here  and  there 
obscure  and  devious  paths  leading  no  one  knows  whither.  Not 
that  attempts  at  exploration  have  been  lacking,  for  investigation 
has  been  busy  in  all  directions,  and  concerning  the  particular  topic 
under  consideration — that  of  traffic  compacts — much  has  been  said 
and  not  a  little  written.  The  public  addresses  on  this  topic  have 
been  mainly  denunciatory  and  of  no  permanent  value.  The  essay- 
ists have  less  uniformly  opposed  the  idea;  but  their  produc- 
tions when  once  read  have,  as  a  rule,  and  in  many  cases  fortunately, 
been  laid  aside  without  serious  consideration.  The  discussion  has, 
however,  been  of  value.  It  has  attracted  public  attention  and  thus 
prepared  the  way  for  a  more  intelligent  consideration  of  whatever 
in  this  line  may  be  proposed  for  legislative  or  other  public  action. 
The  subject  matter  of  these  various  arguments  for  and  against 
traffic  compacts,  known  in  Europe  as  joint  purse  arrangements  and 
in  America  commonly  called  pools,  must  be  largely  repetitious, 
but  its  presentation  may  be  so  varied  as  to  create  new  impressions 
or  correct  old  ones.  It  is  not,  therefore,  in  the  hope  of  contribu- 
ting anything  essentially  new  that,  in  response  to  the  invitation  of 
The  Independent^  I  venture  to  discuss  the  question ;  but  if  I  shall 
be  able  to  suggest  some  thought  for  which  any  reason  shall  serve 
to  promote  investigation,  my  purpose  will  have  been  served. 

It  is  axiomatic  that  business  which  is  common  to  two  or  more 
persons  must  permit  of  division ;  otherwise  it  is  not  common.  The 
division  may  be  effected  by  agreement  or  strife,  consent  or  com- 
petition ;  but  it  must  be  equally  apparent  to  all  candid  minds  that 
competition,  unregulated,  becomes  self-destructive,  involving  in 
its  progress  toward  self-destruction  large  waste.  This  is  true  not 
only  of  the  carrying  business,  which  because  of  its  quasi-public 
nature  occupies  a  unique  position,  but  it  applies  as  well  to  other 

Reprinted  by  permission  from  The  Independent  of  June  i,  1893. 


NECESSITY  FOR  RAILWAY  COMPACTS. 


217 


business.  The  procedure  of  insurance  companies  in  the  conduct 
of  their  affairs  furnishes  an  illustration  which,  by  reason  of  the 
public  interest  involved,  is  somewhat  analogous  to  that  of  railways. 
It  is  a  matter  of  common  knowledge  that  the  rates  charged  for  fire 
insurance  premiums  are,  in  all  cities,  fixed  by  agreement  and  en- 
forced by  rigid  provisions,  extending  so  far  as  to  require  the  dis- 
charge of  agents  found  cutting  the  rates  and  the  termination  of  all 
relations  with  companies  that  fail  to  conform  to  the  agreed  scale. 
Such  compact,  altho'  preventing  strife  does  not  eliminate  competi- 
tion, but  operates  to  divide  the  business  measurably  in  accord  with 
the  facilities  and  advantages  offered  by  the  various  companies, 
supplemented  by  the  energy  and  ability  of  their  representatives. 
It  is  conceded  by  the  public  that  in  this  business  strife  is  as  fraught 
with  danger  to  themselves  as  to  the  insurance  companies,  because 
it  is  apparent  that  the  value  of  the  indemnity  offered  is  predicated 
upon  the  ability  of  the  companies  to  obtain  rates  sufficiently  high 
to  be  profitable,  and  the  public  know  that  without  some  combina- 
tion that  will  prevent  excessive  competition  and  secure  a  propor- 
tionate division  of  earnings,  the  rate  of  premium  would  soon  be 
forced  down  to  an  unremunerative  basis,  and  the  protection  upon 
which  they  depend  would  be  a  minus  quantity.  From  this  illus- 
tration it  will  be  perceived  that  in  this  and  other  lines  of  business 
compacts  having  for  their  object  the  maintenance  of  systematic 
distributive  methods  are  simply  a  means  looking  to  the  preserva- 
tion of  competitive  forces. 

It  is  the  almost  universal  practice  in  connection  with  railway 
operations,  when  referring  to  towns  served  by  two  or  more  rail- 
roads, to  designate  them  as  common  or  competitive  points,  the 
words  being  used  interchangeably ;  but  it  will  be  noticed  that  as 
descriptive  of  the  character  of  traffic  subject  to  distribution  the 
word  "  common  "  instead  of  "  competitive  "  is  employed;  and  in 
order  better  to  understand  the  point  involved  in  the  choice  of  the 
words  it  may  be  well  to  define  them.  According  to  the  Century 
Dictionary  "common"  means — of  or  pertaining  to  all;  being  a 
general  possession  or  right;  and  "competitive" — the  act  of  seek- 
ing or  endeavoring  to  gain  what  another  is  endeavoring  to  gain  at 
the  same  time.  Webster  defines  "common  "  as  belonging  to,  or 
relating  equally  or  similarly  to  more  than  one ;  shared  by  all  mem- 
bers of  a  class;  and  "  competition  "  as  strife  for  one  and  the  same 
object.  It  will  be  seen,  therefore,  that  the  one  admits  the  rights 
of  others  and  presupposes  equity ;  while  the  other  denies  the  rights 
of  any  and,  if  justified,  proclaims  that  might  makes  right. 

Railroads  are  the  creatures  of  the  state.  So  far  as  they  serve 
a  public  function  they  exist  not  because  of  any  inherent  ri^ht,  but 
by  permission.  With  this  fact  in  mind  and  heeding  the  distinc- 
tion between  the  words  "common  "  and  "  competitive  "  it  will  be 
apprehended  that,  by  use  of  the  word  "common"  as  descriptive 
of  traffic  at  junction  points  it  is  suggested  that  all  carriers,  who 


2i8  NECESSITY  FOR  RAILWAY  COMPACTS. 

because  of  chartered  rights  and  privileges  have  constructed  rail- 
roads to  such  points,  are  thereby  entitled  to  such  a  proportion  of 
the  common  traffic  as  their  presence,  together  with  their  facilities, 
legitimately  commands.  Not  what  they  can  get  by  means  of  strife, 
for  that  might  result  in  a  monopoly  of  the  business  by  a  single 
carrier,  but  a  division  of  that  which  is  common  to  all,  in  order 
that  the  rights  of  each  may  be  preserved. 

It  is  well  understood  that  the  purpose  underlying  the  act  to 
regulate  commerce  is  the  prevention  of  discrimination  as  between 
both  shippers  and  localities.  In  the  framing  of  the  law  the  com- 
mon practice  of  carriers  in  favoring  one  shipper  or  one  locality 
over  another  was  sought  to  be  prevented,  but  it  was  not  perceived 
that  discrimination,  as  fatal  in  its  results  to  the  shipper  or  the  lo- 
cality could  be  effected  through  the  independent  action  of  differ- 
ent lines  acting  within  the  law,  as  was  possible  by  the  action  of 
an  individual  line  in  the  absence,  or  the  direct  violation  of  the  law. 
Suppose,  for  illustration,  that  A  has  a  grain  elevator  on  the  line 
of  one  road  at  X,  and  B  has  an  elevator  located  on  another  road  at 
the  same  point.  These  elevators  have  a  common  source  of  sup- 
ply. Naturally  either  elevator  cannot  ship  by  any  other  road  than 
the  one  on  which  it  is  located.  Now  although  both  roads  may 
comply  with  the  law  so  far  as  their  individual  lines  are  concerned, 
the  making  by  one  road  of  a  less  rate  for  a  similar  service  than  is 
made  by  the  other  is  a  discrimination  as  between  shippers  as  surely 
as  if  both  elevators  were  located  on  the  same  line,  and  the  differ- 
ent rates  made  by  the  same  road.  So  also  in  regard  to  localities. 
The  State  of  Iowa  is  crossed  from  east  to  west  by  five  different 
railways  running  on  approximately  parallel  lines  a  few  miles  apart. 
The  areas  of  territory  lying  between  these  several  lines  are  de- 
pendent upon  them  for  transportation  facilities,  and  if  the  rates 
made  by  one  road  are  less  than  those  made  by  the  parallel  lines  at 
corresponding  stations,  discriminations  as  between  localities  as 
surely  results  as  if  different  rates  were  made  by  either  one  of  the 
roads  from  contiguous  stations  on  its  own  line.  From  these  sim- 
ple illustrations  it  will  be  perceived  that  traffic  compacts  whereby 
equality  of  charges  for  like  services  between  coincident  points,  or 
between  shippers  by  different  lines  at  common  points  may  be  se- 
sured,  are  not  only  in  harmony  with,  but  absolutely  essential  to 
the  perfect  operation  of  the  law ;  if  indeed  the  statement  is  not 
warranted  that  in  no  other  way  can  its  successful  operation  be 
hoped  for  outside  of  a  general  consolidation  of  all  lines  and  the 
destruction  of  the  American  railway  system  as  at  present  organ- 
ized. 

The  law  very  properly  assumes  a  position  in  respect  to  carriers* 
rates  very  different  from  that  of  other  business,  in  that  it  stipu- 
lates that  charges  shall  be  reasonable,  going  so  far  as,  in  some  in- 
stances, to  determine  the  maximum  limit  of  reasonableness.  But 
stability  in  connection  with  traffic  charges  is  perhaps  more  import- 


NECESSITY  FOR  RAILWAY  COMPACTS. 


219 


ant  than  reasonableness.  In  these  days  of  sharp  competition  and 
narrow  margins  a  slight  difference  in  railroad  charges  is  often  suf- 
ficient to  determine  the  question  of  profit  or  loss ;  and  the  same 
necessity  that  exists  for  the  prevention  of  discrimination  for  con- 
temporaneous service  as  between  shippers,  is  operative  in  a  large 
degree  with  respect  of  time.  It  is  not  of  vital  importance  to  the 
tradesman  whether  the  rate  on  his  merchandise  from  New  York 
to  Chicago  is  a  dollar  or  fifty  cents,  provided  his  competitor  in 
business  pays  the  same  rate ;  but  it  is  essential  to  him  to  know  when 
he  goes  to  New  York  to  lay  in  his  stock  of  goods  for  an  ensuing 
season,  that  this  competitor,  who  follows  him  a  little  later,  will  not 
be  able  to  obtain  any  less  rate  of  freight  on  his  purchases. 

As  between  this  question  of  low  rates  and  stable  rates  there  has 
always  been  a  difference  of  opinion,  arising  chiefly  from  a  misap- 
prehension of  the  relation  they  bear  to  traffic.  The  scale  or 
amount  of  charges  is  chiefly  important  to  the  consumer,  while 
stability  or  uniformity  in  rates  is  mainly  of  interest  to  the  dealer ; 
but  the  control  of  the  one  is  no  more  important  than  the  regula- 
tion of  the  other. 

But  in  addition  to  equal,  reasonable  and  stable  service  the  peo- 
ple of  this  country  are  of  right  demanding  that  the  convenience 
and  efficiency  of  railway  service  shall  be  maintained  in  a  constantly 
increasing  ratio.  The  response  to  this  demand  creates  a  paradox 
in  that  it  is  conducive  to  both  economy  and  waste ;  that  is  to  say, 
the  supply  of  transportation  facilities  adequate  for  the  propet 
handling  of  traffic  in  time  of  pressure  is  much  in  excess  of  thar 
required  for  the  aggregate  traffic  of  the  year,  provided  it  could  be 
equally  distributed  over  that  period.  It  will  be  naturally  under- 
stood that  to  comply  with  this  very  proper  demand  for  extra  equip- 
ment, railroads  must  charge  a  sufficient  margin  above  expenses 
and  interest  charges  (to  say  nothing  of  dividends)  to  provide  for 
the  required  outlay ;  but  it  should  also  be  understood  that  if  a  rail- 
road can,  by  the  reduction  of  a  rate  on  special  shipments  secure 
traffic  which  otherwise  would  go  to  another  line,  any  rate  above 
actual  movement  expenses  is  a  source  of  profit,  altho'  if  all  of  its 
rates  were  correspondingly  low  bankruptcy  would  be  inevitable. 
It  therefore  follows  that  if  aggregate  tariff  charges  on  the  entire 
traffic  of  the  country  is,  as  required  by  law,  adjusted  on  a  reason- 
able basis,  there  is  no  room  for  rate  reductions ;  and  that  if  reduc- 
tions are  made  the  people  as  a  whole  suffer  because  thereby  rail- 
roads are  precluded  from  earning  a  sufficient  amount  to  supply 
needed  facilities.  This  is  a  fact  not  generally  apprehended  by 
either  railway  men  or  the  public,  because  of  the  common  failure 
to  understand  that  the  railways  of  this  country  are  practically  parts 
of  one  great  system  instead  of  being,  as  is  popularly  supposed, 
made  up  of  individual  lines,  each  having  the  right  to  act  independ- 
ently of  the  others.  For  the  prevention  of  this  waste  of  strife  as 
well  as  contributing  to  equality  of  service,  that  form  of  traffic 


2  20  NECESSITY  FOR  RAILWAY  COMPACTS. 

compacts  called  a  pool  agreement  promiises  to  afford  the  desired 
relief  by  removing  from  carriers  the  possibility  of  profiting  either 
individually  or  collectively  by  such  means. 

The  word  ' '  pool, "  as  applied  to  compacts  by  which  the  equitable 
distribution  among  carriers  of  common  traffic  is  sought  to  be  ef- 
fected, is  both  inapt  and  inaccurate,  especially  as  there  is  attach- 
ing to  it  a  disreputable  flavor  growing  out  of  its  intimate  associa- 
tion with  gambling  operations.  This  is  unfortunate,  for  notwith- 
standing that  in  the  contribution  and  distribution  of  traffic  of  its 
earnings  the  conditions  inherent  in  gambling  pools  are  directly 
opposed  to  those  operative  in  the  railway  pool,  the  term  conveys 
an  erroneous  idea.  To  the  majority  of  persons  it  implies  some- 
thing excessively  wrong ;  something  to  be  vigorously  opposed  and 
if  possible  effectually  prohibited.  This  general  impression  is 
further  strengthened  by  the  all  too- common  belief  that  because 
railway  compacts  are  advocated  by  railway  managers  they  are 
necessarily  detrimental  to  public  welfare.  Without  pausing  here 
to  indicate  wherein  this  idea  is  fallacious,  or  to  show  why  and  how 
the  interests  of  the  carriers  and  the  people  are,  and  in  the  nature 
of  things  must  be  identical,  it  is  sufficient  to  say  that  altho'  neither 
wholly  good  nor  altogether  bad,  railway  pools  are  demonstrably 
the  best  ascertained  method  of  fostering  the  mutual  concerns  of 
the  carriers  and  their  patrons,  and  therefore  should  be  made  le- 
gally operative ;  but  also  because  they  readily  lend  themselves  to 
the  possible  abuse  of  the  same  interests  they  should  be  subject  to 
supervision  and  regulation. 

Pooling  as  applied  to  the  carrying  business  expresses  an  effort 
on  the  part  of  carriers  to  distribute  common  business  in  an  intelli- 
gent and  economical  way  instead  of  allowing  it  to  seek,  through 
the  medium  of  rate  wars,  those  channels  which  will  pay  the  most 
for  it.  At  first  railway  officials  sometimes  employed  the  pool  to 
accomplish  that  which  is  so  generally  charged  against  the  practice 
— viz:  the  exaction  of  the  highest  possible  rates.  It  soon  became 
apparent,  however,  that  other  forces  than  the  agreement  of  rail- 
way men  controlled  transportation  charges,  and  the  idea  was 
modified  through  various  stages  until  at  the  time  the  act  to  regu- 
late commerce  became  effective  it  had  come  to  include  the  funda- 
mental principles  of  the  act — to  wit :  the  removal  of  discrimination 
as  between  shippers,  and  the  maintenance  of  equal  rates  for  simi- 
lar and  contemporaneous  service.  This  is  a  very  different  thing 
from  the  making  of  rates,  the  one  involving  compliance  with  the 
principles  of  justice  and  equity  and  the  other  arrogating  the  right 
to  consult  individual  interests  to  the  exclusion  of  others.  As  al- 
ready stated,  the  original  object  of  a  pool  agreement  was  the  main- 
tenance of  railway  earnings  on  the  basis  of  *  *  charging  all  the  traf- 
fic would  bear. "  This  has  been  wholly  abandoned,  and  in  lieu 
thereof  has  been  substituted  the  theory  of  maintaining  equality  on 
the  basis  of  charging  what  the  traffic  ought  to  bear.     It  is  now 


NECESSITY  FOR  RAILWAY  COMPACTS.  221 

generally  admitted  that  traffic  compacts  should  provide  for  the 
maintenance  of  such  rates  as  will,  first,  put  all  parties  subject 
thereto  on  a  basis  of  absolute  equality  with  respect  to  each  other, 
and  second,  to  make  them,  all  things  considered,  as  favorably 
situated  with  regard  to  markets  as  are  their  competitors  in  the 
same  lines  of  business  outside  of  pooled  territory. 

It  is  unfortunate  that  among  railways  the  idea  prevailed  that 
pooling  compacts  would  not  be  accorded  a  standing  in  court,  and 
that  in  consequence  no  appeal  was  made  to  that  tribunal  for  the  en- 
forcement of  such  contracts  anterior  to  the  passage  of  the  act  to 
regulate  commerce.  Since  that  time,  however,  such  contracts 
have  been  carried  into  the  courts  and  are  fully  sustained  both  as 
to  their  binding  force  as  between  the  contracting  parties,  and  as  to 
their  being  in  full  accord  with  public  policy. 

To  recapitulate, 

First.  The  public  may  properly  demand  from  carriers  equality 
of  treatment  on  the  basis  of  reasonable  rates,  and  the  carrier  may 
with  equal  right  demand  protection  against  the  dishonesty  of  his 
fellow  carrier  who  violates  his  compact  for  the  benefit  of  the  ship- 
per who  unjustly  profits  thereby. 

Second.  Railroads  are  the  creatures  of  the  state  and,  as  subject 
to  the  requirements  of  continuous  and  indiscriminate  service,  are 
entitled  to  share  in  the  carrying  business.  Therefore,  the  traffic 
accessible  to  two  or  more  lines  should  not  be  regarded  as  "  com- 
petitive "  in  the  sense  that  it  is  to  be  sold  to  the  highest  bidder, 
but  as  ''common  "  in  the  sense  that  each  line  is  entitled  to  a  fair 
proportion  of  it  at  the  legally  published  rate. 

Third.  Traffic  or  pooling  compacts  which  provide  for  the  equit- 
able division  of  common  traffic  are  the  only  yet  discovered  means 
whereby  the  interests  of  all  parties  may  be  conserved. 

Fourth.  Inasmuch  as  unrestricted  pooling  and  unrestricted  strife 
are  alike  capable  of  being  used  for  harm,  government  should  as- 
sume the  regulation  and  enforcement  of  such  compacts,  to  the  end 
that  they  may  not  be  allowed  to  work  an  injustice  to  the  people  on 
the  one  hand  or  to  the  railways  on  the  othei;. 

Chicago,  111. 


THE    APPORTIONMENT    OE    TRAFFIC  AMONG 
COMPETING   RAILROADS. 

By  Hon.  Joseph  Nimmo^  Jr. 

The  chapter  on  Railroad  Federations  and  the  Apportionment  of 
Competitive  Traffic,  herewith  republished  from  my  official  report 
on  the  Internal  Commerce  of  the  United  States  for  the  year  1885, 
constitutes  a  part  of  the  results  of  an  investigation  of  the  commer- 
cial interests  of  the  country  and  of  writing  reports  upon  that  sub- 
ject during  the  period  from  1875  to  1885.  In  the  course  of  that 
investigation  I  carefully  considered  every  objection  to  *' pooling," 
so  called,  of  which  I  could  conceive  or  which  was  brought  to  my 
attention  by  other  students  of  the  subject.  I  also  challenged 
every  prominent  advocate  of  the  expedient  to  a  proof  of  all  that 
he  claimed  for  it.  Finally,  as  the  result  of  such  inquiries,  relating 
not  only  to  the  commercial  and  economic  aspects  of  the  question, 
but  also  to  its  merits  from  the  point  of  view  of  public  policy,  I 
was  forced  to  the  conclusion  that  agreements  as  to  the  division  of 
competitive  traffic  for  the  specific  purpose  of  maintaining  agree- 
ments as  to  rates  between  competing  lines  were  in  the  nature  of 
self-restraint ;  also  that  they  had  served  the  purpose  of  correcting 
certain  flagrant  evils  in  the  conduct  of  transportation  by  rail. 
These  conclusions  were  reached  two  years  before  the  passage  of 
the  Act  to  Regulate  Commerce.  As  an  officer  of  the  Government, 
I  did  not  at  that  time  feel  entirely  justified  in  recommending  the 
legalization  of  the  apportionment  of  competitive  traffic,  preferring 
to  await  the  developments  of  experience.  A  somewhat  careful 
observation  of  the  course  of  events  during  the  last  eight  years  has, 
however,  not  only  verified  the  conclusions  which  I  reached  in  the 
year  1885,  but  has  forced  upon  me  the  conviction  that  agreements 
as  to  the  division  of  traffic  among  competing  lines  lie  at  the  very 
foundation  of  order  in  the  conduct  of  the  internal  commerce  of  the 
country,  and  that  such  agreements  are,  besides,  essential  to  the 
successful  administration  of  the  Act  to  Regulate  Commerce. 

There  appear  to  be  but  two  fundamental  questions  to  be  con- 
sidered by  any  person  who  sincerely  desires  to  reach  a  right  con- 
clusion upon  this  important  matter,  viewing  it  solely  in  the  light 
of  the  public  interests.     Those  questions  are : 

First.   Are  combinations  for  the  purpose  of  restraining  the  full 

Reprinted  by  permission  from  pamphlet  published  by  Author. 


APPORTIONMENT  OF  TRAFFIC.  223 

force  of  competitive  struggles  in  commercial  and  industrial  pur- 
suits in  any  case  justifiable  upon  considerations  of  public  policy? 

Second.  Should  agreements  as  to  the  pooling  or  division  of 
traffic  for  the  maintenance  of  rates  among  competing  railroads 
be  regarded  as  in  the  nature  of  just  and  beneficent  combinations? 

It  is  too  late  in  the  day  to  spend  much  time  in  debating  the  first 
of  these  questions.  The  evolution  of  the  commercial  and  indus- 
trial enterprises  of  the  age  constitutes  its  full  and  complete 
answer.  Our  country  is  to-day,  on  all  sides,  confronted  by  com- 
binations for  good  and  combinations  for  evil ;  by  combinations 
which  protect  competition  and  promote  progress,  and  by  combina- 
tions which  stifle  competition  and  arrest  progress.  The  very  in- 
tensity of  human  activity  in  commerce,  in  industrial  pursuits,  and 
in  transportation  have  compelled  certain  restraints  through  com- 
bination, the  necessity  for  which  and  the  beneficent  character  of 
which  have  been  clearly  proved  by  the  lessons  of  experience. 
Combination  is  the  most  pronounced  symptom  of  our  civilization. 
By  it  the  largest  results  in  science,  in  art,  in  trade,  in  education, 
and  in  religion  are  being  evoked.  Combination  shields  capital  and 
draws  it  out  into  active  employment,  and  it  also  protects  labor 
against  itself  and  against  capital. 

Besides  all  this,  the  jurisprudence  of  Great  Britain  and  of  the 
United  States  clearly  sustain  restraints  upon  destructive  competi- 
tion. This  is  no  new  doctrine  of  the  law.  In  the  case' of  Mitchell 
V.  Reynolds,  decided  about  the  year  171 1,  and  reported  in 
"  Smith's  Leading  Cases,"  the  policy  of  the  law  of  England  at 
that  time  is  stated  as  follows : 

' '  The  present  doctrine  is  that  while  contracts  in  total  restraint  of  trade  are 
void,  yet  if  the  restraints  imposed  be  partial,  reasonable,  and  founded  on  good 
consideration,  the)'-  are  valid  and  will  be  enforced." 

I  believe  there  is  nothing  in  English  or  in  American  jurispru- 
dence which  conflicts  with  that  doctrine. 

I  turn,  therefore,  to  the  second  of  the  test  questions  above  pro- 
pounded, viz:  Should  agreements  as  to  the  pooling  or  division  of 
traffic  for  the  maintenance  of  rates  among  competing  railroads  be 
regarded  as  in  the  nature  of  just  and  beneficent  combinations?  My 
answer  to  this  question  is  in  part  embraced  in  the  extract  from  my 
leport  on  Internal  Commerce  for  the  year  1885,  which  these  state- 
ments preface. 

The  reasons  there  adduced  in  favor  of  the  legitimacy  of  agree- 
ments in  regard  to  the  division  of  traffic  for  the  purpose  of  main- 
taining rates  are  based  upon  the  following  considerations :  first, 
the  physical  infirmity  of  the  railroad  which  prevents  it  from  ever 
becoming  a  free  highway  of  commerce ;  and,  second,  the  fact  that 
the  evolution  of  the  American  Railroad  System,  with  all  its 
dependent  relationships,  compelled  the  adoption  of  administrative 
methods  which  lacked  the  conservative  influence  of  that  caution 
which  attaches  to  ownership  and  to  personal  responsibility  for  re- 
sults. 


224  APPORTIONMENT  OF  TRAFFIC. 

But  there  is  a  third  and  much  more  cogent  reason  why  agree- 
ments as  to  the  share  of  competitive  traffic  should  be  legalized. 
It  is  a  reason  which  emerges  from  the  overshadowing  fact  that  the 
evolution  of  the  American  Railroad  System  has  begotten  a  compe- 
tition of  commercial  forces  vastly  more  potential  than  any  power 
which  the  railroads  of  the  country  can  exercise,  either  singly  or 
through  any  possible  form  of  combination.  The  railroad  mana- 
gers of  the  country  foresaw  the  loss  of  independence  and  of  power 
which  was  involved  in  the  formation  of  the  American  Railroad 
System,  and  they  opposed  every  step  toward  that  loss  of  power 
until  opposition  was  seen  to  be  useless.  The  tendency  toward  a 
substantial  union  of  American  railroads  was  irresistible.  The  econo- 
mies of  transportation  and  the  needs  of  the  commercial  and  indus- 
trial development  of  the  country  tended  strongly  in  that  direction. 
Connected  tracks,  a  common  guage,  union  depots,  through  rates, 
the  classification  of  commodities,  rate  agreements,  prorating, 
through  tickets,  related  time  schedules,  the  unimpeded  passage  of 
freight,  passenger,  express,  and  postal  cars,  and  of  locomotives 
over  the  tracks  of  different  companies,  and  to  a  considerable  ex- 
tent the  employment  of  operatives  on  the  lines  of  different  com- 
panies^— all  these  co-operative  arrangements  came  about  in  spite 
of  every  effort  to  preserve  the  autonomy  of  different  railroads 
as  independent  factors  in  the  great  work  of  internal  commerce. 
This  wonderful  economic  and  commercial  evolution  was  fully  rec- 
ognized and  legalized  in  the  act  of  June  15,  1866.  That  act,  the 
most  important  concerning  the  internal  commerce  of  the  United 
States  which  has  ever  been  enacted  by  Congress,  reads  as  follows: 
AN  ACT  to  Facilitate  Commercial,  Postal,  and  Military  Communication  among 

the  States. 

Whereas,  the  Constitution  of  the  United  States  confers  upon  Congress,  in 
express  terms,  the  power  to  regulate  commerce  among  the  several  States,  to 
establish  post  roads,  and  to  raise  and  support  armies ;  therefore. 

Be  it  enacted  by  the  Senate  and  House  of  Representives  of  the  United  States 
in  Congress  asse7nbled,  That  every  railroad  company  m  the  United  States 
whose  road  is  operated  by  steam,  its  successors  and  assigns,  be,  and  is  hereby, 
authorized  to  carry  upon  and  over  its  road,  boats,  bridges,  and  ferries  all  pas- 
sengers, troops.  Government  supplies,  mails,  freight,  and  property  on  their 
way  from  any  State  to  another  State,  and  to  receive  compensation  therefor 
and  to  connect  with  roads  of  other  States,  so  as  to  form  continuous  lines  for 
the  transportation  of  the  same  to  the  place  of  destination.     *    *    * 

Section  2.  Aftd  be  it  further  e?iacted.  That  Congress  may  at  any  time  alter» 
amend,  or  repeal  this  act. 

This  act  of  Congress  constitutes  essentially  The  Charter  of  the 
American  Railroad  System. 

Furthermore,  all  that  is  involved  in  this  vast  system  of  trans- 
portation in  the  nature  of  co-operation  is  sustained  and,  with  re- 
spect to  freight  traffic,  made  obligatory  upon  the  companies  by 
the  provisions  of  section  7  of  the  Act  to  Regulate  Commerce. 
This  section  reads  as  follows : 

That  it  shall  be  unlawful  for  any  common  carrier  subject  to  the  provisions  of 
this  act  to  enter  into  any  combmation,  contract,  or  agreement,  expressed  or 


APPORTIONMENT  OF  TRAFFIC.  225 

implied,  to  prevent,  by  change  of  time  schedule,  carriage  in  different  cars,  or 
by  other  means  or  devices,  the  carriage  of  freight  from  being  continuous  from 
the  place  of  shipment  to  the  place  of  destination ;  and  no  break  of  bulk,  stop- 
page, or  interruption  made  by  such  carrier  shall  prevent  the  carriage  of 
freights  from  being  and  being  treated  as  one  continuous  carriage  from  the 
place  of  shipment  to  the  place  of  destination,  unless  such  break,  stoppage,  or 
interruption  was  made  in  good  faith  for  some  necessary  purpose,  and  without 
any  intent  to  avoid  or  unnecessarily  interrupt  such  continuous  carriage,  or  to 
evade  any  of  the  provisions  of  this  act. 

The  physical,  commercial,  and  financial  union  of  railroad  inter- 
ests has  proceeded  to  that  point  at  which  the  entire  American 
Railroad  System  must  be  regarded  as  ' '  many  members  but  one 
body." 

This  wonderful  railroad  system  constitutes  the  most  gigantic 
combination  of  material  interests  that  the  world  ever  saw — a  com- 
bination essentially  in  the  public  interest,  formed  not  by  the 
volition  of  those  who  control  its  constituent  elements,  but  by  an 
overshadowing  compulsion  of  circumstance  which  forced  those 
elements  into  union. 

The  most  important  result  secured  by  the  formation  of  the 
American  Railroad  System  was  that  it  presented  an  opportunity 
for  the  free  and  untrammeled  competition  of  commercial  and  in- 
dustrial forces. 

Thus  it  has  come  about  that  the  commercial  and  industrial  in- 
terests of  the  country,  which  many  times  exceed  the  interests  of 
transportation,  in  point  of  capital  invested,  have  secured  a  com- 
plete mastery  over  the  latter.  The  unforeseen  and  most  porten- 
tous outcome  of  this  wonderful  commercial  development  is  the  fact 
that  men  engaged  in  commercial  pursuits  and  in  productive  indus- 
tries, seeing  the  advantages  which  this  condition  of  affairs  opened 
up  to  them,  have  united  in  trusts  and  in  combinations  of  various 
sorts,  some  of  which  are  in  restraint  of  the  freedom  of  trade  and 
of  industry,  and  unmistakably  and  flagrantly  in  the  nature  of 
monopolies. 

Thus  trusts  and  monopolistic  combinations  not  only  interfere 
with  the  inalienable  right  of  all  men  to  live  and  labor  in  an  open 
field  and  in  a  pure  atmosphere,  in  the  prosecution  of  commercial 
enterprise,  but  they  also  demoralize  and  oppress  the  transporta- 
tion interests  of  the  country.  These  trusts  sometimes  combine  so 
as  to  throw  their  shipments  upon  one  road  or  another  in  such  man- 
ner as  to  baffle  railroad  managers  and  to  produce  outrageously  un- 
just discriminations.  The  value  of  the  commodities  carried  by 
rail  each  year  is  at  least  three  times  the  value  of  the  entire  rail- 
road property  of  the  country,  and  thirty  times  the  annual  gross 
earnings  of  all  the  railroads  of  the  country.  This  clearly  exhibits 
the  enormous  preponderance  of  the  forces  of  trade  over  those  of 
transportation,  and  it  also  suggests  the  ease  with  which  trusts  and 
combinations  of  trusts  are  able  to  thwart  the  railroads  in  their 
efforts  to  protect  themselves,  or  to  observe  the  requirements  of 
the  Act  to  Regulate  Commerce. 

15 


2  26  APPORTIONMENT  OF  TRAFFIC. 

The  evil  of  allowing  large  shippers  to  dominate  the  internal 
commerce  of  the  country,  and  of  permitting  the  railroads  to  be- 
come parties  to  such  unjust  discriminations,  was  first  brought 
to  my  attention  by  Mr.  Albert  Fink  in  the  year  1876,  and  is  pre- 
sented on  page  40  of  the  Appendix  to  the  First  Annual  Report  on 
the  Internal  Commerce  of  the  United  States,  submitted  June  30, 
1877. 

Just  here  it  appears  proper  to  invite  attention  to  certain  radical 
differences  between  trusts  and  monopolies  in  trade  and  industry, 
and  agreements  between  railroad  companies  as  to  the  apportion- 
ment of  competitive  traffic  for  the  purpose  of  maintaining  rates: 

1.  The  commercial  and  industrial  trust  is  formed  between  a 
select  few,  who  keep  all  the  rest  of  the  competitors  out  of  the 
combination ;  they  then  proceed  to  break  down  all  the  outsiders ; 
whereas  a  railroad  traffic  apportionment  must  of  necessity  em- 
brace all  of  the  competitors  in  its  provisions,  and,  besides,  it  pre- 
serves the  weaker  lines  from  destruction. 

2.  Again,  each  member  of  a  commercial  or  industrial  trust 
steadfastly  seeks  to  retain  his  place  inside  of  the  organization, 
while  each  member  of  a  railroad  "pool"  or  apportionment  of 
traffic  is  desirous  of  escaping  from  its  restraints ;  the  tendency,  in 
the  absence  of  legal  sanction  of  the  agreements  entered  into, 
causing  such  associations  to  be  unstable,  and  in  many  cases  lead- 
ing to  their  dissolution. 

These  are  distinctive  traits  of  radically  different  sorts  of  combi- 
nations— the  one  in  the  .nature  of  monopoly  and  in  restraint  of 
wholesome  competition,  and  the  other  in  the  nature  of  restraint  of 
monopoly  and  protective  of  wholesome  competition. 

At  the  present  time  agreements  as  to  the  apportionment  of  com- 
petitive traffic  constitute  the  only  known  antidote  to  the  baneful 
influences  which  are  exerted  over  transportation  affairs  by  coru- 
mercial  trusts,  and  large  shippers. 

In  passing,  I  would  remark  that  in  my  opinion  there  is  no  sub- 
ject which  at  this  time  so  loudly  calls  for  earnest  and  thorough 
investigation  at  the  hands  of  state  legislatures  and  of  Congress  as 
do  the  evils  arising  from  the  assaults  of  illegitimate  trusts  and 
other  pernicious  combinations  upon  commerce,  upon  industrial 
enterprise,  and  upon  the  conduct  of  the  transportation  business  of 
the  country.  The  sole  end  and  aim  of  such  assaults,  in  so  far  as 
relates  to  the  railroads,  is  to  produce  discriminations  in  rates, 
which  shall  be  for  the  benefit  of  the  parties  to  such  iniquitous 
combinations.  The  act  of  July  2,  1890,  '*  to  protect  trade  and 
commerce  against  unlawful  restraints  and  monopolies  "  is  especi- 
ally directed  against  such  trusts  as  are  here  referred  to,  but  there 
is  need  of  amendments  which  shall  enable  the  courts  and  the  gen- 
eral public  more  readily  to  distinguish  between  combinations  and 
practices  which  are  legitimate  and  beneficial  toward  the  public 
interest,  and  such  as  are  illegitimate  and  baneful  in  their  purposes 
and  tendencies. 


APPORTIONMENT  OF  TRAFFIC,  227 

Thus  I  have  attempted  to  show  that  in  the  evolution  of  the 
American  Railroad  System  unforeseen  and  apparently  overwhelm- 
ing difficulties  have  arisen,  which  difficulties  are  in  some  measure 
traceable  to  infirmities  of  administration,  but  mainly  to  the  as- 
saults of  commercial  and  industrial  trusts  upon  the  transportation 
interests  of  the  country. 

The  result  of  this  untoward  course  of  events  has  been  that  the 
rate-making  power  has  gradually  slipped  from  the  hands  of  railway 
managers,  to  whom  it  is  nominally  delegated,  and  that  it  has  been 
remitted  to  the  more  potential  shippers.  It  needs  no  word  of  ex- 
planation to  prove  that  this  is  at  once  demoralizing  to  trade,  to  in- 
dustrial enterprise  and  to  transportation.  Manifestly,  also,  it  is 
the  very  inspiration  of  commercial  disorder.  At  last,  for  self -pro- 
tection and  to  maintain  the  orderly  conduct  of  commerce,  the  rail- 
road companies  were  forced  to  enter  into  agreements  as  to  the 
maintenance  of  rates.  That  I  believe  to  be  unimpeachable  his- 
tory. The  experience  of  railroad  managers  has  also  proved  to 
them  that  vSuch  agreements,  essential  to  self-preservation  and  to 
the  preservation  of  commercial  order,  can  be  maintained  only  upon 
the  basis  of  precedent  agreements  as  to  the  share  of  the  competitive 
traffic  or  of  the  receipts  therefrom  which  shall  be  azvarded  to  each 
competitor.  That  I  believe,  also,  expresses  the  logic  of  events.  I 
have  been  forced  to  my  studies  of  the  internal  commerce  of  the 
United  States  to  accept  these  conclusions  as  fundamental  law  of 
railroad  transportation,  and  to  maintain  that  their  practical  recog- 
nition is  vital  to  the  existence  and  beneficent  administration  of 
the  American  Railroad  System. 

The  first  of  the  conclusions  just  enunciated,  viz. ,  the  necessity 
of  agreements  as  to  what  competitive  rates  shall  be,  and  as  to  the 
maintenance  of  such  rates,  now  commands  general  public  approval. 
This  fact  is  clearly  expressed  in  the  sixth  section  of  the  Act  to 
Regulate  Commerce,  which  section  requires  ten  days'  notice  of 
advances  in  rates  and  three  days'  notice  of  reductions  in  rates. 

The  second  of  the  conclusions  above  noted,  viz.,  that  agree- 
ments as  to  the  share  of  competitive  traffic  which  shall  be  awarded 
to  each  competitor  are  essential  to  the  observance  of  the  law 
touching  the  maintenance  of  rates,  is,  to  my  mind,  simply  a  corol- 
lary to  the  first  proposition  as  to  the  necessity  of  agreements  in 
regard  to  the  maintenance  of  rates,  and  I  entertain  little  doubt 
that  this  view  of  the  case  will  ere  long  be  generally  accepted.  I 
do  not  express  this  opinion  as  the  dictum  of  any  philosophy 
other  than  the  philosophy  of  practical  experience  in  the  conduct 
of  the  railroad  transportation  interests  of  the  country,  under  enor- 
mous difficulties,  which  in  an  imperfect  manner  I  have  attempted 
to  sketch. 

In  this  connection  it  is  with  great  pleasure  that  I  advert  to  the 
exceedingly  able  and  exhaustive  report  submitted  to  the  Senate, 
January  16,  1886,  by  the  Honorable  Shelby  M.  Cullom,  Senator 


228  APPORTIONMENT  OF  TRAFFIC. 

of  the  United  States,  in  his  capacity  as  chairman  of  the  Senate 
Committee  on  Interstate  Commerce.  The  language  there  em- 
ployed (page  201)  by  Senator  Cullom  is  as  follows: 

"It"  (t.  e.,  the  various  forms  of  restraint  upon  competition,  as 
described)  "would  not  destroy  the  benefits  of  legitimate  competi- 
tion, but  it  would  place  a  wholesome  restraint  upon  reckless  com- 
petition, and  in  that  way  lessen  unjust  discrimination,  which  is 
developed  in  its  most  objectionable  forms  under  the  nourishing 
influence  of  unrestricted  competition.  For  these  reasons  the  com- 
mittee does  not  deem  it  prudent  to  recommend  the  prohibition  of 
pooling." 

In  his  speech  in  the  Senate  January  6,  1887,  in  opposition  to  the 
fifth  section  of  the  Act  to  Regulate  Commerce,  Senator  Piatt,  of 
Connecticut,  adopted  my  nine  general  conclusions  upon  pooling 
associations  as  his  conclusion  in  regard  to  the  whole  matter.  If  I 
were  to  rewrite  those  theses  today  I  would  make  no  change  in  them 
other  than  to  make  them  more  emphatic,  and  to  add  that  the  les- 
sons of  experience  have  proved  beyond  all  doubt  that  agreements 
as  to  the  apportionment  of  competitive  traflic  are  so  manifestly  in 
the  nature  of  self-restraint,  and  so  essential  to  the  orderly  conduct 
of  the  American  Railroad  System,  as  to  demand  their  legalization 
under  no  other  constraints  than  those  imposed  by  the  common 
law  relative  to  unreasonable  rates  and  unjust  discriminations, 
which  provisions  of  the  common  law  are  adopted  into,  and  made 
a  fundamental  part  of,  the  "Act  to  Regulate  Commerce." 

And  now  I  desire  to  invite  attention  to  the  exact  conclusions  at 
which  I  arrived  in  the  year  1885 : 

1.  Agreements  as  to  the  apportionment  of  traffic  between  com- 
peting railroads,  for  the  purpose  of  maintaining  rates,  are  bene- 
ficial toward  the  public  interests,  and  ought  to  be  legalized. 

2.  The  question  as  to  whether  any  particular  agreement  in  re- 
gard to  the  apportionment  of  railroad  traffic  is  justifiable,  upon 
the  ground  of  maintaining-  rates,  or  of  securing  any  other  laudable 
object,  is  one  which  might  well  be  left  to  the  determination  of  a 
national  railroad  commission. 

These  conclusions  were  reached  two  years  before  the  Act  to 
Regulate  Commerce  became  a  law,  and  when,  in  the  language  of 
a  distinguished  jurist,  I  viewed  this  whole  subject  "with  a  mind 
illuminated  by  the  sense  of  official  responsibility."  Now,  viewing 
it  I  trust  with  as  sincere  a  regard  for  the  public  interests,  I  have 
no  hesitancy  in  saying  that  my  confidence  in  the  intelligent  judg- 
ment and  patriotic  impulse  of  the  gentlemen  who  constitute  the 
Interstate  Commerce  Commision  leads  me  to  the  belief  that  it 
would  be  well  to  confide  to  that  body  the  responsibility  of  deter- 
mining whether  any  particular  agreement  as  to  the  division  of 
competitive  traffic  is  or  is  not  characterized  by  the  conditions 
above  mentioned  as  constituting  the  essential  requisites  of  legality. 


POPULAR  AND  LEGAL  VIEW  OP  TRAEFIC 
POOLING. 

By  Hon,  Thos.  M.  Cooley. 

Perhaps  nothing  in  respect  to  the  relations  between  the  railroad 
companies  and  the  public  attracts  more  attention  at  the  present 
time  than  the  arrangements  to  which  the  name  of  pooling  is  popu- 
larly given.  In  railroad  circles  these  arrangements  are  looked 
upon  as  necessary  to  prevent  all  railroad  property  becoming  abso- 
lutely worthless  to  the  stockholders,  as  a  very  large  part  of  it  is 
now ;  and  those  managers  who  are  hoping  to  earn  dividends  are 
therefore  laboring  earnestly  to  make  these  arrangements  effectual. 
On  the  other  hand,  an  impression  is  largely  prevalent  that  pooling 
contracts  are  contrivances  whereby  inequality  and  excess  in  rates 
can  be  maintained,  and  a  monopoly  injurious  to  the  public  inter- 
est established ;  and  they  are  by  many  persons  condemned  as  be- 
ing unquestionably  wrong  if  not  absolutely  illegal.  As  the  rela- 
tions between  the  public  and  the  railroads  are  so  necessary,  so 
constant  and  so  extensive  as  to  make  harmony  between  them  in 
all  that  relates  to  railroad  service  of  very  high  importance,  it 
seems  desirable  to  give  some  attention  to  these  arrangements — 
their  nature,  their  purpose  and  their  legality — and  to  bring  to- 
gether some  considerations  bearing  upon  these  points  respect- 
ively, with  a  view  to  giving  in  brief  space  the  means  of  forming 
some  opinion  in  respect  to  them.  Space  will  not  admit  of  this 
being  done  with  any  completeness,  but  perhaps  the  salient  points 
may  be  presented.  What  is  said  will  refer  especially  to  pooling 
in  freight  traffic,  but  in  principle  it  will  apply  to  passenger  traffic 
also. 

WHAT    THEY    ARE. 

The  pooling  arrangements  between  railroads  in  this  country 
have  not  all  been  on  the  same  plan,  but  it  is  probably  not  impor- 
tant now  to  take  notice  of  any  attempts  in  that  direction  which 
have  been  made  and  then  abandoned.  The  suggestion  of  pooling, 
though  likely,  perhaps,  to  occur  anywhere,  comes  to  us  from  Eng- 
land, where  pooling  contracts  in  the  railroad  business  and  others 

Reprirfted  by  permission  from  The  Railway  Review  of  January  8,  1887. 


230  LEGAL  VIEW  OF  TRAFFIC  POOLING. 

of  a  semi-public  nature  have  been  held  not  to  be  illegal,  both  when 
they  were  made  on  the  basis  of  an  equal  division  of  profits  ( ^)  and 
where  the  basis  was  a  division  of  business  between  the  contracting 
parties.  (2).  In  this  country  the  method  of  pooling  seems  to  be 
for  the  several  contracting  parties  to  create  some  common  author- 
ity upon  which  will  be  conferred  the  power  to  establish  and  change 
rates  for  the  transportation  of  property  within  a  certain  territory 
or  over  a  certain  line,  and  also  to  apportion  the  business  between 
them.  The  apportionment  will  be  made  upon  a  consideration  of 
what  the  companies  severally  would  be  likely  to  obtain  under  the 
operation  of  free  competition,  and  it  will  be  changed  from  time  to 
time  if  found  to  be  relatively  unjust.  The  feature  of  arbitration 
upon  controversies  arising  between  the  contracting  parties  will 
also  be  prominent  in  the  arrangement.  The  contract  will  be  made 
for  a  definite  term  of  years,  with  liberty  to  dissatisfied  parties  to 
withdraw  upon  reasonable  notice,  and  it  will  be  likely  to  provide 
that  a  commission  acting  for  all  shall  give  direction  to  shipments 
when  this  shall  be  necessary  to  give  each  road  its  allotted  share. 
But  as  shippers  will  have  a  legal  right  to  have  their  property  trans- 
ported by  a  line  of  their  own  selection,  it  may  well  happen  that 
some  roads  will  carry  more  and  some  less  than  their  proportion, 
and  provision  will  therefore  be  necessary  for  a  periodical  adjust- 
ment of  balances,  and  for  the  payment  of  moneys  from  one  to  an- 
other as  may  be  needful,  upon  such  allowance  for  the  business 
done  above  the  allotted  share  as  shall  be  fixed  upon  as  just.  Per- 
haps clauses  will  be  inserted  in  the  contract  which  will  have  for 
their  purpose  to  make  it  for  the  interest  of  shippers  to  send  for- 
ward their  property  according  to  the  directions  of  the  commission, 
but  compulsory  power  in  this  direction  must  practically  be  very 
limited. 

THEIR    PURPOSE. 

The  avowed  purpose  in  pooling  is  to  avoid  ruinous  competition 
between  the  several  roads  represented,  and  the  unjust  discrimina- 
tion between  shippers  which  is  found  invariably  to  attend  such 
competition.  The  desirability  of  the  last  mentioned  object  is 
agreed  to  on  all  hands.  The  existence  of  unjust  discriminations 
is  one  of  the  chief  complaints  made  by  the  public  against  railroad 
management,  and  one  of  the  reasons  always  assigned  for  interfer- 
ence by  law.  It  may  therefore  be  taken  as  agreed  that,  so  far  as 
pooling  arrangements  have  the  correction  of  this  evil  in  view,  the 
purpose  is  commendable. 

But  the  primary  object  unquestionably  is  self -protection  against 
ruinous  competition ;  and  it  is  not  to  be  expected  that  as  to  this 
the  public  opinion  of  the  country  will  be  prepared  to  give  sponta- 
neous approval.     A  pooling  arrangement  is  a  combination ;  and 

(i)  Hare  vs.  Railway  Co.,  2  Johnson  &  Hemming's  Reports,  80. 
(2)  Collins  vs.  Locke,  4  Appeal  Cases,  674. 


LEGAL  VIEW  OF  TRAFFIC  POOLING.  231 

all  combinations  in  a  business  which  so  intimately  concerns  the 
public  look  like  attempts  to  establish  a  monopoly,  and  may  some- 
times result  in  establishing  one.  To  monopoly  the  public  is  in- 
stinctively hostile,  because  it  takes  from  them  the  power  of  deal- 
ing on  equal  terms  with  those  who  control  it.  Besides,  a  combina- 
tion that  has  for  its  object  to  check  competition,  seems  to  stand  in 
hostility  to  the  industrial  maxim  that  "competition  is  the  life  of 
trade,"  a  maxim  which  from  time  immemorial  has  been  greatly 
prevalent,  and  is  commonly  supposed  to  be  one  admitting  of  no 
question  and  of  universal  application.  The  advantages  of  unrestric- 
ted competition  are  apparent  to  the  public  in  industrial  life  all 
about  us,  and  while  in  some  kinds  of  business  this  is  sharp,  yet 
selfishness  is  generally  sufficiently  active  and  sufficiently  intelli- 
gent to  prevent  its  becoming  ruinous.  It  does  not  detract  from 
the  worth  or  soundness  of  the  maxim  that  under  the  operation  of 
unrestricted  competition  individual  disasters  must  occur ;  for  when 
this  happens  it  is  very  likely  to  be  found  either  that  the  parties 
did  not  understand  the  business  they  were  engaged  in,  or  managed 
badly,  or  lacked  the  necessary  capital,  or  in  some  other  particulars 
were  inadequately  equipped.  Against  ruin  from  these  causes  pro- 
tection is  impossible.  The  maxim  referred  to  is  so  commonly  ac- 
cepted that  courts  have  made  it  a  basis  for  important  judgments; 
and  it  is  not  to  be  wondered  at,  therefore,  that  the  question  should 
be  made  whether  it  is  competent  to  erect  barriers  to  free  competi- 
tion in  a  business  so  important  to  the  public  as  that  which  is  car- 
ried on  by  the  railroads. 

The  answer  made  on  behalf  of  the  railroad  companies  is  that  the 
business  and  the  necessary  preparation  for  carrying  it  on  make 
their  case  so  peculiar  that  competition  necessarily  affects  them  in 
a  way  different  to  that  in  which  it  affects  others ;  so  different  that 
it  may  be  destructive  to  them  where  to  others  it  would  only  be 
stimulating  and  wholesome.  Some  of  the  reasons  which  will  be 
assigned  for  this  will  be  recognized  by  every  one  as  possessing 
force.  In  most  kinds  of  business,  competition  easily  and  naturally 
regulates  the  extent  to  which  a  business  shall  be  carried  on ;  per- 
sons engage  in  it  only  when  they  think  they  see  a  reasonable 
opening  for  profit ;  they  push  the  business  with  men  and  money 
when  the  promise  of  success  is  such  as  to  warrant  it,  and  when  it 
is  not,  operations  are  reduced;  some  perhaps,  go  out  of  the  busi- 
ness, and  capital  seeks  other  investments.  The  merchant,  when 
competition  becomes  too  severe  for  him,  may  turn  farmer  or  man- 
ufacturer; the  manufacturer  may  change  his  line  of  production  or 
temporarily  reduce  it ;  and  these  changes  it  is  generally  possible 
to  make  without  serious  loss  Very  seldom  the  whole  plant  for 
one  business  will  be  useless  for  any  other.  The  general  results  of 
competition  will  therefore  be  such  that,  while  the  whole  public 
will  have  the  benefit  of  low  prices,  a  general  equilibrium  of  de- 
mand and  supply  will  be  maintained  without  bringing  disaster  to 
individuals. 


232  LEGAL  VIEW  OF  TRAFFIC  POOLING. 

Much  of  this  is  as  different  as  possible  in  the  railroad  world. 
The  investment  for  the  purpose  of  a  railroad  is  permanent,  and  is 
available  to  a  single  purpose  only.  If  it  can  not  be  made  available 
for  the  transportation  of  persons  and  property  it  is  a  wasted  in- 
vestment ;  as  much  so  as  if  it  had  been  cast  into  the  sea.  But 
when  the  construction  of  railroads  is  entirely  unrestricted,  there  is 
always  a  tendency  to  build  more  than  are  needed,  and  more  than 
can  be  made  profitable.  The  reasons  for  this  are  numerous.  Rail- 
roads are  a  great  local  convenience ;  every  village  wants  one  or 
more;  and  it  is  easy  for  plausible  men,  who  see  individual  profit 
in  their  construction,  to  convince  the  local  community  that  a  road 
which  will  accommodate  their  local  needs  must  be  profitable.  If 
the  law  permits  a  levy  of  municipal  taxes  in  aid  of  the  local 
scheme,  it  will  not  be  difficult  to  obtain  a  popular  vote  in  its  favor; 
if  taxation  for  the  purpose  is  not  allowed,  the  popular  credulity 
will  be  appealed  to  with  assurance  of  great  increase  in  property 
from  the  building  of  a  road  which  will  give  easy  access  to  market ; 
and  men  will  give  freely  in  the  expectation  that  in  one  way  or  an- 
other they  will  receive  large  returns.  Roads  have  thus  in  many 
cases  been  constructed  at  general  expense  in  which  a  capitalist  for 
the  purpose  of  investment  would  put  nothing.  But  roads  are  also 
built  under  an  expectation,  on  the  part  of  those  who  originate  and 
push  them,  that  in  some  way  the  originators  will  be  enabled  to 
make  them  available  for  their  individual  benefit,  regardless  of 
their  real  value ;  sometimes  through  holding  the  control  and  man- 
aging them ;  sometimes  by  forcing  the  owners  of  other  roads  to 
which  they  would  be  rivals  to  buy  them.  For  these  and  other 
reasons  roads  are  brought  into  existence  for  which  there  is  no  ade- 
quate demand,  and  whatever  people  have  been  induced  to  put  in 
them  is  a  dead  loss.  In  some  other  countries  the  government  en- 
deavors to  provide  against  such  losses  by  refusing  charters  for 
roads  which  seem  not  to  be  called  for  by  any  public  need,  or  which 
can  only  be  profitable  by  rendering  worthless  some  existing  line ; 
but  the  policy  in  this  country  has  always  been  to  leave  railroad 
building  practically  unrestricted,  and  the  best  and  most  useful 
line,  though  it  may  fully  accommodate  the  public  need,  is  never 
secure  against  being  ruined  by  the  construction  of  a  rival  line 
which  scheming  and  unscrupulous  persons  induce  the  credulous  to 
furnish  the  capital  for. 

But  such  roads  when  constructed  remain,  and  will  be  operated 
so  long  as  the  cost  of  operating  can  be  paid  from  the  earnings. 
They  may  pass  from  the  hands  of  stockholders  into  those  of  bond- 
holders, and  though  even  then  pay  nothing  upon  the  bonds,  they 
will  continue  to  be  operated.  This  is  the  condition  of  very  much 
of  the  railroad  property  of  the  country  to-day ;  hundreds  of  mil- 
lions of  the  capital  invested  in  it  is  absolutely  sunk,  but  the  plant 
remains  and  the  road  will  be  operated,  though  those  whose  prop- 
erty it  represents  neither  receive  dividends  upon  their  investment 


LEGAL  VIEW  OF  TRAFFIC  POOLING.  233 

nor  have  any  reasonable  prospect  that  they  ever  will.  If  then  a 
company  to  which  the  bankrupt  company  is  a  rival  shall  not  only 
endeavor  to  pay  operating-  expenses  and  the  interest  on  its  indebt- 
edness, but  also  to  pay  dividends  to  stockholders,  it  must  do  so  in 
competition  with  one  whose  managers  expect  to  pay  no  dividends, 
and  no  interest  except  as  perhaps  they  may  find  it  necessary  to  do 
so  in  order  to  retain  control.  Such  a  state  of  things  can  exist  in 
no  business  from  which  a  transfer  of  capital  is  possible ;  and  the 
competition  it  creates  instead  of  being  "the  life  of  trade,"  is  as  to 
this  business  destructive  of  the  capital  invested  in  it.  It  becomes 
a  matter  of  necessity,  then,  that  the  competition  which  is  so  likely 
to  be  destructive  should  be  restrained  within  the  limits  which  will 
admit  of  reasonable  and  reliable  prosperity ;  and  some  common 
arrangement  between  the  roads  seems  to  be  the  only  means  yet 
found  by  which  this  can  be  accomplished.  The  common  arrange- 
ment agreed  upon  for  the  purpose  is  that  of  pooling ;  it  has  grown 
out  of  the  necessities  of  the  case ;  and,  while  it  is  necessary  to  the 
railroad  companies,  it  is  unjust  to  no  one.  This,  briefly  and  im- 
perfectly stated,  is  the  railroad  view  of  the  necessity  and  pro- 
priety of  pooling  compacts. 

It  is  proper  to  add  to  this  statement  that  the  want  of  harmony 
between  the  railroad  companies  which  has  its  most  noticable  mani- 
festations in  wars  of  rates  causes  injury  and  inconvenience  to  the 
public  in  ways  which  railroad  managers  in  public  discussions  are 
not  likely  to  dwell  upon  or  make  prominent.  In  other  kinds  of 
business  when  competition  is  unrestricted  dealers  find  it  to  their 
interest  to  study  the  convenience  of  the  public,  and  to  invite  cus- 
tom by  being  as  accommodating  as  possible ;  and  what  they  do  in 
this  regard  is  no  wrong  or  injury  or  inconvenience  to  their  rivals, 
but  only  incites  them  to  be  equally  accommodating.  But  railroad 
companies  cannot  be  accommodating  to  the  full  extent  of  the  pub- 
lic needs  unless  they  are  accommodating  to  each  other ;  for  a  very 
large  proportion  of  those  who  have  occasion  to  use  their  facilities, 
desire  to  pass,  in  person  or  with  their  property,  from  one  road  to 
another,  and  wish  to  do  this  without  unnecessary  cost  of  transfer 
or  unnecessary  delay.  But  hostile  competition,  while  it  may 
incite  the  roads  to  run  a  race  in  popularity,  also  leads  them  to 
make  many  arrangements  which  are  inconsistent  with  the  full 
accommodation  to  the  public  which  might  be  and  ought  to  be 
given.  Rival  lines  have  their  station  buildings  on  different  sides 
of  a  town  when  they  might  with  the  same  convenience  to  them- 
selves and  with  greater  convenience  to  the  public  be  together ; 
they  have  different  station  houses  at  crossings  when  one  would 
answer  for  all ;  their  time  tables  are  so  arranged  as  to  cause  in- 
convenience whenever  a  passenger  leaves  their  line  to  pass  upon 
another  which  is  not  working  in  harmony  with  them,  and  they 
establish  soliciting  agencies  which  are  only  made  important  by 
the  rivalry.     In  all  these  things  the  several  companies  think  they 


234 


LEGAL  VIEW  OF  TRAFFIC  POOLING. 


advance  their  individtial  interest  in  the  competition;  but  in  doing 
so  they  not  only  make  the  service  they  render  to  the  pubHc  less 
valuable  but  also  more  expensive.  Some  of  the  evils  of  unre- 
stricted competition  have  been  generally  recognized  by  those  who 
have  been  most  earnest  in  demanding  congressional  legislation, 
and  it  has  been  one  feature  of  the  bills  introduced  that  restraints, 
more  or  less  considerable,  should  be  imposed. 

It  is  also  proper  to  add  that,  whether  the  railroad  companies 
anticipate  it  or  not,  no  pooling  arrangement,  unless  the  aid  of  the 
law  can  be  had  for  its  enforcement,  can  possibly  put  an  end  to 
competition  between  them.  The  arrangement  may  regulate  com- 
petition but  cannot  stop  it.  The  apportionment  of  business,  as 
has  been  said,  will  be  made  on  a  calculation  of  what  the  respective 
roads  would  be  likely  to  obtain  under  free  competition;  and  every 
company,  in  view  of  the  periodical  readjustment  of  percentagfes, 
will  be  interested  in  showing  that  its  facilities  and  its  management 
naturally  bring  to  it  a  larger  proportion  than  it  now  receives ;  and 
the  rivalry  for  public  favor  will  go  on  as  before,  though  it  may  be 
expected  that  some  of  the  features  of  rivalry  which,  when  it  is 
hostile,  are  peculiarly  injurious  to  the  public,  will  be  eliminated 
by  the  agreement  to  work  in  harmony.  Moreover  the  several 
soliciting  agents  of  the  roads  will  have  a  personal  interest  in 
showing  their  value  to  their  employers  by  presenting  good  results 
from  their  service  in  the  employment;  the  permanent  value  of 
each  road,  as  well  as  the  market  value  of  its  stock,  will  depend 
largely  on  the  shares  awarded  to  it  in  the  periodical  readjust- 
ments ;  all  the  prejudices  which  concur  in  bringing  about  first 
secret  and  then  public  departures  from  common  agreements  will 
only  be  repressed  by  the  pooling,  not  removed ;  and  not  only  will 
competition  continue  notwithstanding  the  common  agreement,  but 
it  will  by  force  of  the  circumstances  be  so  far  active  and  efficient 
in  keeping  rates  within  bounds  that  one  would  hazard  nothing  in 
saying  that,  within  the  territory  whose  business  is  naturally  affect- 
ed by  the  competition  of  the  trunk  lines,  the  period  when  rates 
can  be  controlled  by  combinations  and  kept  at  figures  limited  only 
by  the  discretion  or  the  greed  of  the  managers,  is  gone  forever. 

THE  LEGALITY  OF  RAILROAD  POOLS. 

But  it  is  said  that  all  contracts  which  have  for  their  object  to 
restrain  competition  are  illegal  at  the  common  law,  because  they 
are  in  conflict  with  a  general  principle  of  public  policy.  The  term 
illegal  is  somewhat  ambiguous.  A  contract  may  be  illegal  in  the 
sense  that  it  is  forbidden  by  a  law  which  imposes  some  penalty  for 
entering  into,  or  it  may  be  illegal,  because,  though  not  forbidden, 
it  is  considered  to  be  of  an  injurious  and  demoralizing  tendency, 
and  therefore  the  law  will  not  favor  it,  but  will  refuse  to  lend  its 
aid  in  enforcement.  If  a  contract  is  only  illegal  in  this  last  sense, 
parties  are  at  perfect  liberty  to  enter  into  it  if  they  please,  but 


LEGAL  VIEW  OF  TRAFFIC  POOLING.  235 

performance  of  its  conditions  must  be  entirely  voluntary.     It  is 
under  this  head  that  pooling  contracts  are  supposed  to  come. 

It  is  a  familiar  principle  in  the  law  that  contracts  in  general  re- 
straint of  trade  are  void.  Therefore  if  a  man  contracts  with  his 
rival  in  business  that  for  any  agreed  consideration  he  will  no  longer 
pursue  his  customary  calling  within  the  state  in  which  he  resides, 
the  promise  is  one  he  may  keep  at  pleasure  or  break  with  impunity. 
The  reasons  are  that  such  a  contract  if  enforced  would  deprive 
the  public  of  the  benefits  of  competition,  and  at  the  same  time 
impose  restraints  going  far  beyond  what  would  be  needful  for  pro- 
tection to  the  party  bargaining  for  them.  But  it  was  always  agreed 
that  competition,  in  so  far  as  it  operated  injuriously  to  individuals 
might  with  entire  competency  be  limited  by  contract;  and  in  a 
great  variety  of  cases  it  has  been  held  that  a  man  may  lawfully 
bargain  to  put  an  end  to  an  injurious  competition  in  his  business 
in  the  locality  where  he  carries  it  on,  or  that  he  may  bargain  to 
prevent  the  establishment  in  that  locality  of  a  competing  business 
which  he  fears  may  be  injurious.  It  is  only  when  he  exacts  terms 
that  go  be5^ond  giving  him  protection  that  the  law  holds  his  con- 
tract to  be  unreasonable,  injurious  to  the  public,  and  therefore 
illegal.  The  reader  unfamiliar  with  the  law  reports  will  find  many 
of  the  cases  referred  to  in  the  note ;  and  it  will  appear  on  an  exam- 
ination that  in  all  of  them  the  legality  of  bargaining  to  limit  com- 
petition when  it  is  kept  within  the  bounds  of  reasonable  protec- 
tion, is  either  assumed  or  expressly  affirmed.  (^) 

The  principle  upon  which  these  cases  are  decided  is  that  by 
which  pooling  arrangements,  so  far  as  concerns  their  legality, 
must  stand  or  fall.  If  they  are  illegal  it  is  because  they  establish 
unreasonable  restraints  upon  competition  in  business ;  if  they  can 
be  supported  in  law,  it  must  be  upon  the  ground  that  they  only 
give  to  the  parties  concerned  that  reasonable  protection  against 
competition  which  is  needful  to  their  prosperity.  Having  this  in 
mind  it  may  be  useful  to  refer  to  such  judicial  decisions  as  seem 
to  bear  most  directly  upon  this  peculiar  class  of  contracts. 

It  has  already  been  said  that  pooling  arrangements  have  been 
sustained  in  Great  Britian.  One  of  the  cases  passed  upon  was  a 
pooling  arrangement  between  stevedores ;  another  was  between 
competing  railroads,  and  in  neither  case  was  it  deemed  an  objec- 
tion that  the  effect  of  the  contract  was  to  limit  competition,  or 
that  this  was  to  be  accomplished  by  a  combination.  In  the  rail- 
road case  (2)  Vice  Chancellor  W.  Page  Wood  said  among  other 
things :   "  It  is  a  mistaken  notion  that  the  public  is  benefitted  by 

(i)  The  following'  cases  are  selected  from  the  great  number  which  recognize  the  principle, 
because  the  republication  in  the  volumes  here  given  is  accompanied  by  valuable  notes  and 
references:  Mitchell  vs.  Reynolds,  Smith's  Leading  Cases,  508;  Perkins  vs.  Lyman,  6  Ameri- 
can Decisions,  158;  Pierce  vs.  Fuller,  5  American  Decisions,  102;  Bowser  vs.  Bliss,  43  Ameri- 
can Decisions,  93;  Grundy  vs.  Edwards,  23  American  Decisions,  409;  Morgan  vs.  Perhamus, 
38  American  Reports,  607;  Pike  vs.  Thomas,  7  American  Decisions,  741;  Drill  Company  vs. 
Morse,  4  American  Reports,  513;  Hoyt  vs.  Holly,  12  American  Reports,  390;  Hubbard  vs. 
Miller,  15  American  Reports,  153;  Cook  vs.  Johnson,  36  American  Reports,  64. 

(2)  Hare  vs.  Railway  Co.,  2  Johnson  &  Hemmingi's  Reports,  80. 


236  LEGAL  VIEW  OF  TRAFFIC  POOLING. 

putting  two  railroad  companies  against  each  other  until  one  is 
ruined;  the  result  being  at  last  to, raise  the  fares  to  the  highest 
possible  standard." 

Before  either  of  these  cases  was  decided  it  had  been  held  by  the 
supreme  court  of  New  York  [in  1847]  that  a  contract  between  the 
proprietors  of  canal  boats  for  fixing  rates  and  for  a  division  of  net 
earnings  was  void,  though  the  object  was  expressed  to  be  ''to  es- 
tablish and  maintain  fair  and  uniform  rates  of  freight,  and  to 
equalize  the  business  of  forwarding  on  the  Erie  and  Oswego  canals 
among  themselves,  and  to  avoid  all  unnecessary  expenses  in  do- 
ing the  same."  The  argument  of  the  court  is  brief,  and  is  sum- 
med up  in  two  short  sentences:  "The  object  of  this  combination 
was  obviously  to  destroy  competition  between  the  several  lines  in 
the  business  engaged  in.  It  was  a  conspiracy,  between  the  indi- 
viduals contracting,  to  prevent  a  free  competition  among  them- 
selves, in  the  business  of  transporting  merchandise,  property  and 
passengers  upon  the  public  canals."  "It  is  a  familiar  maxim  that 
competition  is  the  life  of  trade.  It  follows  that  whatever  destroys 
or  even  relaxes  competition  in  trade  is  injurious  if  not  fatal  to  it." 
(^)  Thus  it  will  be  seen  that  by  giving  a  bad  name  to  the  arrange- 
ment and  quoting  the  old  maxim,  the  court  was  supposed  to  have 
sufficiently  reasoned  the  case  out,  and  the  judgment  followed  as 
of  course.  A  similar  agreement  was  shortly  afterwards  condemn- 
ed by  the  same  court,  in  the  case  of  Stanton  against  Allen,  (2)  as 
being  designed  to  exempt  the  standard  of  freights,  etc.,  "from 
the  wholesome  influence  of  rivalry  and  competition." 

These  cases  have  not  passed  entirely  without  criticism  in  this 
country.  They  were  cited  to  the  supreme  court  of  Wisconsin  not 
long  after  they  were  made,  and  were  there  dissented  from  in  very 
vigorous  terms.  (3)  Referring  to  the  maxim  that  competition  is 
the  life  of  trade.  Judge  Howe,  speaking  for  the  court,  said  that  it 
"  is  one  of  the  least  reliable  of  the  host  that  may  be  picked  up  in 
every  market  place.  It  is  in  fact  the  shibboleth  of  mere  gambling 
speculation ;  and  is  hardly  entitled  to  take  rank  as  an  axiom  in  the 
jurisprudence  of  this  country.  I  believe  universal  observation 
will  attest  that  for  the  last  quarter  of  a  century  competition  in  the 
trade  has  caused  more  individual  distress,  if  not  more  public  in- 
jury, than  the  want  of  competition.  Indeed,  by  reducing  prices 
below  or  raising  them  above  values — as  the  nature  of  the  trade 
prompted — competition  has  done  more  to  monopolize  trade,  or  to 
secure  exclusive  advantages  in  it,  than  has  been  done  by  contract. 
Rivalry  in  trade  will  destroy  itself,  and  rival  tradesmen,  seeking 
to  remove  each  other,  rarely  resort  to  contract,  unless  they  find  it 
the  cheapest  mode  of  putting  an  end  to  the  strife.  And  it  seems 
to  me  not  a  little  remarkable  that  in  the  case  of  Stanton  vs.  Allen 

(i)  Hooker  vs.  Vandewater  4  Denio's  Reports,  349. 

(2)  5  Denio's  Reports,  434. 

(3)  In  Kellogg  vs.  Larkin  3  Chandler's  Reports,  133. 


LEGAL  VIEW  OF  TRAFFIC  POOLING.  237 

it  should  have  been  urged  against  the  agreement  that  its  object 
was  to  exempt  the  standard  of  freights,  etc. ,  '  from  the  wholesome 
influence  of  rivalry  and  competition. '  For  it  is  very  certain  that 
because  of  that  very  purpose — ^because  they  did  tend  to  protect 
the  party  against  the  influence  of  rivalry  and  competition — 
courts  of  law  have  upheld  like  agreements  in  partial  restraint  of 
trade,  ever  since  the  case  of  Mitchell  vs.  Reynolds."  (^) 

But  there  are  several  other  American  cases  which,  in  their  gen- 
eral reasoning,  must  be  conceded  to  give  some  support  to  the 
cases  decided  in  New  York.  Among  these  are  the  cases  in  which 
combinations  between  coal  companies  to  control  the  production  of 
coal  and  its  price  in  the  market  have  been  held  illegal.  {^)  An 
agreement  between  dealers  in  a  certain  line  of  goods  not  to  put 
any  upon  the  market  for  three  months  has  also  been  held  to  be 
illegal.  (3)  So  has  a  combination  which  had  for  its  purpose  to 
effect  a  corner  in  the  wheat  market.  (4)  So  has  a  combination  be- 
tween parties  furnishing  recruits  in  time  of  war,  whereby  they 
agree  not  to  furnish  them  for  less  than  a  fixed  price,  (s)  So  have 
agreements  not  to  compete  in  bids  for  public  contracts.  (^)  So 
have  combinations  to  keep  up  the  price  of  salt.  (7)  And  combi- 
nations to  put  up  or  to  put  down  the  wages  of  laborers,  whether 
entered  into  by  laborers  or  by  employers,  must  in  general  depend 
for  their  observance  upon  the  good  faith  of  those  who  make  them. 
(8)  It  would  be  easy  to  show  that  many  of  these  cases  have  no 
important  bearing  upon  the  question  of  the  legality  of  railroad 
pools,  but  they  are  likely  to  be  brought  under  consideration  in 
any  legal  controversy  on  that  subject,  and  the  propriety  of  their 
being  here  referred  to  will  thereafter  be  apparent. 

In  the  light  of  the  judicial  decisions  as  they  now  stand  in  this 
country,  it  cannot  safely  be  affirmed  that  the  law  will  lend  its  aid 
to  enforce  the  pooling  contracts  between  railroads.  It  seems  on 
the  other  hand  more  than  probable  that  the  courts  will  declare  that 
such  contracts  are  not  sanctioned  by  the  law.  This  is  said  irre- 
spective of  any  opinion  upon  the  question  whether,  as  an  original 
proposition,  such  ought  to  be  the  result.  The  early  decisions  in 
New  York,  which  have  given  a  certain  tendency  to  subsequent 
judicial  thought  and  action,  were  made  with  little  or  no  investiga- 
tion of  the  subject  involved,  and  without  any  attempt  whatever  to 

(i)  This  is  the  leading  case  on  contracts  in  restraint  of  trade,  and  was  decided  in  1711 
I  P.  Williams'  Reports,  181.     i  Smith's  Leading  Cases,  508. 

(2)  Morris  Run  Coal  Co.  vs.  Barclay  Coal  Co.,  68  Penn.  State  Reports,  173;  Amot  vs.  Coal 
Co.,  68  New  York  Reports,  558. 

(3)  India  Association  vs.  Kock,  14  Louisiana  Reports,  168. 

(4)  Raymond  vs.  Leavitt,  46  Michigan  Reports,  447. 

(5)  Marsh  vs.  Russell,  66  New  York  Reports,  288. 

(6)  Atcheson  vs.  Mallon,  43  New  York  Reports,  147.  People  vs.  Stephens,  71  New  York 
Reports,  527.  Ray  vs.  Mackin,  100  Illinois  Reports,  246.  Swan  vs.  Chorpenning,  20  Cali- 
fornia Reports,  182. 

(7)  Salt  Co.  vs.  Guthrie,  35  Ohio  State  Reports,  666. 

(8)  Journey  men  Tailors"^  Case,  8  Modern  Reports,  10 ;  Commonwealth  vs.  Hunt.  4  Met- 
calf's  Reports,  m  ;  The  Queen  vs.  Rowlands,  17  Queen's  Bench  Reports,  671;  Hilton  vs. 
Eckersly,  6  Ellis  and  Blackburn's  Reports,  47. 


238  LEGAL  VIEW  OF  TRAFFIC  POOLING. 

show  that  the  principle  by  which  the  legality  of  the  arrangements 
to  avoid  injurious  competition  must  be  tested  had  been  overlooked 
or  disregarded  in  the  contracts  before  the  court.  But  they  have 
stood  without  much  question  to  the  present  day ;  in  their  conclu- 
sions they  fall  in  with  prevailing  notions  of  what  is  public  policy 
on  the  subject,  there  is,  a  priori^  a  strong  presumption,  legal  as 
well  as  popular,  that  they  are  correct ;  and  they  are  likely  for  all 
these  reasons,  whether  sound  or  not,  to  stand  as  precedents  which 
courts  will  expect  to  follow.  If  that  shall  be  the  result  of  any 
litigation,  or  if  the  companies  themselves  shall  look  upon  such  a 
result  as  possible,  and  therefore  decline  litigation,  the  companies 
entering  into  pools  must  rely  for  the  enforcement  of  their  con- 
tracts upon  the  honor  of  the  corporate  officers  and  agents,  and 
upon  the  methods  that  may  be  devised  for  making  it  to  the  inter- 
est of  the  several  contracting  parties  to  observe  their  agreements. 

SANCTIONS    FOR    POOLING    CONTRACTS. 

Penalties  to  be  imposed  by  the  association  will  be  out  of  the 
question.  They  will  not  be  paid  voluntarily  by  parties  who  will 
not  voluntarily  observe  their  agreements,  and  they  cannot  be  col- 
lected by  law.  No  doubt  it  might  be  made  part  of  the  pooling 
arrangement  that  a  fund  should  be  provided  by  proportionate  con- 
tributions, and  that  from  the  sum  paid  in  by  any  member  a  pen- 
alty assessed  against  it  should  be  paid ;  but  it  would  be  easy  for 
such  member,  if  dissatisfied,  to  enjoin  the  payment,  or  in  case  of 
its  failure  to  take  steps  for  that  purpose,  for  any  of  its  stockholders 
to  do  so.     Penalties,  therefore,  cannot  constitute  a  reliance. 

The  principal  danger  to  be  guarded  against  is  the  cutting  of 
rates.  In  the  unregulated  and  unreasoning  strife  between  rail- 
road companies  this  cutting  is  not  only  carried  on  to  an  extent 
that  is  ruinous  to  the  companies  themselves,  but  it  becomes  a  dis- 
turbing factor  in  all  commerce ;  and  it  is  perfectly  correct  for  the 
railroad  companies  to  say,  as  they  do  when  defending  pooling, 
that  unjust  discriminations  are  a  necessary  result.  The  sort  of  com- 
petition which  is  ''the  life  of  trade"  in  a  war  of  rates,  incites 
every  agent  to  make  secretly  and  by  every  form  of  indirection 
such  terms  as  will  secure  the  business ;  it  is  inevitable  that  these 
shall  be  without  uniformity,  and  that  those  who  push  hardest  and 
bargain  most — which  will  generally  be  the  large  shippers — will  be 
most  favored.  Low  rates,  when  they  can  be  depended  upon  for 
any  considerable  time,  increase  the  prices  of  grain  and  other  mar- 
ket commodities  in  the  hands  of  producers ;  but  they  affect  prices 
little  if  at  all  when  it  is  uncertain  from  day  to  day  and  from  hour 
to  hour  what  they  are  to  be,  and  consequently  such  benefits  as 
come  from  the  hostile  cutting  of  rates  are  reaped  principally  by 
speculators  and  other  large  shippers.  It  is  doubtful  if  the  ship- 
ping interest  ever  receives  benefits  equivalent  to  the  losses  which 
the  railroad  interest  suffers  in  a  war  of  rates,  and  the  benefits  to 
the   general  public   will   seldom   equal    the  incidental   injuries. 


LEGAL  VIEW  OF  TRAFFIC  POOLING.  239 

Nothing  therefore  can  be  plainer  than  the  desirability  that  reason- 
able rates  should  be  maintained  with  general  uniformity,  so  that 
they  may  be  calculated  upon  in  the  making  of  contracts  and  pur- 
chases, and  so  that  small  shippers  as  well  as  large,  the  man  who 
merely  sends  his  household  goods  as  well  as  the  speculator  in  grain 
and  provisions,  may  have  the  benefit  of  them. 

So  far  as  the  steadiness  in  rates  tends  to  the  benefit  of  the  rail- 
roads, it  is  also  particularly  desirable  for  a  reason  not  often  men- 
tioned. It  is  a  great  misfortune  to  the  country  that  so  many  of 
its  roads  pay  no  dividends.  Though  worthless  to  the  stockholders 
such  roads  have  in  the  stock  market  a  speculative  value,  and  in 
the  hands  of  speculating  men  the  stocks  become  mere  implements 
of  gambling,  and  the  roads  are  managed  with  a  purpose  alternately 
to  put  up  and  put  down  the  quotations  on  the  stock  board,  that 
the  managers  may  make  profit  from  the  sales  and  purchases.  It 
is  beyond  doubt  that  larger  fortunes  have  been  made  in  the 
manipulation  of  some  worthless  roads  with  a  view  to  deceptive  ap- 
pearances for  stock  jobbing  purposes  than  would  have  been  derived 
from  dividends  equal  to  the  current  rate  of  interest.  This  is  an 
evil,  not  solely  because  of  its  fostering  the  prevailing  tendency  to 
demoralizing  and  ruinous  speculation,  but  also  for  the  further  rea- 
son that  it  increases  and  strengthens  among  the  people  at  large  a 
widespread  prejudice  against  railroad  managers  as  men  who  con- 
trive to  accumulate  great  fortunes  at  the  public  cost.  Under  the 
influence  of  this  prejudice  it  may  well  happen  that  the  charges  a 
railroad  makes  for  transportation,  though  barely  sufficient  to  cover 
all  the  items  of  expense,  will  be  thought  exorbitant  by  the  com- 
munity, who  see  the  members  of  the  managing  board  acquiring 
wealth  through  the  ownership  and  management  of  the  stock.  Nor 
are  the  community  to  be  blamed  for  this,  for  they  have  a  right  to 
assume  that  all  the  profits  made  by  managers  are  derived  from  the 
earnings  of  the  roads.  Thus,  non-paying  roads  not  only  foster 
speculative  gambling,  which  is  one  of  the  most  demoralizing  of 
existing  evils,  but  they  also  tend  to  excite  in  the  community  a 
feeling  against  railroad  managers  and  railroad  property,  which 
gradually  extends  to  embrace  all  forms  of  aggregate  and  especially 
of  corporate  wealth ;  and  this  feeling  in  any  time  of  unusual  ex- 
citement or  distress  is  liable  to  break  out  into  uncontrollable  fury, 
and  to  seek  gratification  in  destruction.  All  property  owners,  and 
all  law-abiding  and  patriotic  people,  are  therefore  directly  con- 
cerned in  removing,  so  far  as  may  be  in  their  power,  the  causes 
which  are  likely  to  originate  or  to  foster  such  dangerous  ten- 
dencies. 

But  without  the  aid  of  the  law  to  enforce  pooling  arrangements, 
it  is  not  as  yet  apparent  that  any  scheme  can  be  devised  whereby 
the  cutting  of  rates  can  be  effectually  prevented.  Entering  into 
a  pooling  arrangement  is  an  admission  that  unrestricted  competi- 
tion is  destructive ;  but  when  the  pooling  agreement  is  departed 


240  LEGAL  VIEW  OF  TRAFFIC  POOLING. 

from  and  one  road  begins  to  cut  rates,  the  others,  in  self  protec- 
tion, must  be  suffered  to  cut  also.  This  is  not  enforcing  the  pool- 
ing agreement ;  it  is  destroying  it.  Possibly  if  the  combination 
were  sufficiently  extensive,  a  refractory  road  might  be  temporarily 
crippled,  and  thus  brought  to  terms  by  the  others  refusing  to  ex- 
change business  with  it ;  but  their  power  in  this  regard  is  much 
restricted  by  the  law  prescribing  the  duties  of  common  carriers. 
Besides  a  road  boycotted  by  others  because  it  is  cutting  under 
their  rates  will  be  likely  to  have  the  public  sympathy  as  a  road 
suffering  persecution  in  the  public  interest ;  and  this  sympathy 
will  give  it  valuable  assistance.  It  may  well  happen,  therefore, 
that  an  attempt  at  boycotting  will  prove  a  mortifying  failure.  It 
is  certain  that  it  could  not  be  relied  upon  as  a  general  remedy  for 
the  breach  of  a  pooling  agreement. 

But  these  common  arrangements,  though  unprotected  by  the  law 
have,  nevertheless,  done  very  much  to  save  railroad  property  from 
needless  injury.  They  bring  into  existence  a  commission  or  other 
authority  in  which  all  the  parties  have  confidence,  whicli  is 
charged  with  the  duty  to  keep  the  peace  between  the  roads,  to 
hear  mutual  complaints,  to  investigate  charges  of  the  breach  of 
their  common  agreements,  to  give  redress,  so  far  as  advisory 
power  can  do  so,  and  concentrate  public  opinion  in  railroad  circles 
upon  any  member  failing  to  observe  its  covenants  and  make  it 
feel  the  public  censure.  It  is  natural  to  expect  that  the  benefits 
will  increase  as  the  managers  become  accustomed  within  the 
agreed  limits  to  submit  to  the  direction  and  control  of  the  common 
authority.  But  a  pooling  arrangement  is  only  a  treaty  of  peace; 
as  a  combination  it  has  little  coherence;  and  the  passions  of  a  sin- 
gle railroad  manager,  the  failure  of  a  single  agent  to  keep  faith, 
or  the  nervous  eagerness  to  keep  rolling  stock  employed  when  the 
offerings  of  property  for  transportation  are  light,  may  at  any 
time  break  it  down.  No  treaty  is  law  except  so  long  as  the  con- 
tracting parties  can  see  that  it  is  probably  for  their  interest  to  ob- 
serve it,  and  the  suspected  breach  of  good  faith  in  a  treaty  is  com- 
monly sufficient  to  breed  an  actual  breach. 

.      THE  FUTURE. 

That  the  railroad  problem,  so  far  as  it  is  involved  in  wars  of 
rates  between  the  roads,  cannot  as  yet  be  solved  is  very  manifest ; 
the  railroad  companies  have  only  made  an  effort  in  the  way  of 
solving  it.  Common  agreements,  if  they  had  the  encouragement 
and  protection  of  the  law,  would  very  probably  supply  it ;  but  for 
that  purpose  legislation  would  seem  to  be  essential.  But  legisla- 
tion would  be  mischievous  rather  than  beneficial,  unless  it  was 
conceived  in  the  spirit  of  statesmen,  and  was  made  to  express 
neither  special  favor  for,  nor  special  hostility  to,  the  interest  it 
would  regulate.  The  railroad  interest  of  this  country  represents 
an  enormous  aggregate  of  wealth,  and  an  increasing  aggregate  of 
corporate  poverty ;  and  it  has  immense  capabilities  for  good  or 


LEGAL  VIEW  OF  TRAFFIC  POOLING.  241 

evil  to  the  people.  It  cannot  possibly  be  for  the  interest  of  any- 
country  that  so  large  a  portion  of  the  invested  capital  should  be 
wasted  or  unremunerative,  especially  when  in  that  condition  its 
necessary  tendency  is  to  favor  dishonest  management  and  gambling 
speculation.  On  the  other  hand,  it  is  for  the  interest  of  the 
country  that  the  public  shall  receive,  in  as  large  a  degree  as  shall 
be  possible,  the  benefits  which  were  calculated  upon  in  providing 
by  law  for  the  building  of  the  roads.  Regulating  legislation 
should,  therefore,  be  conceived  neither  exclusively  in  the  interest 
of  railroads  nor  in  the  spirit  of  hostility  to  them.  What  the 
country  needs  is  that  they  shall  be  made  useful ;  not  that  they 
shall  be  crippled  or  bankrupted,  or  made  stock-jobbing  con- 
veniences for  their  managers.  And  no  doubt  when  the  whole 
subject  is  carefully  examined  and  wisely  considered,  it  will  be 
found  that  the  true  interests  of  the  owners  of  railroad  property 
may  be  made  to  harmonize  perfectly  with  the  true  interests  of  the 
public,  and  that  it  will  be  as  wise  for  the  state  to  encourage  and 
protect  whatever  in  corporate  arrangements  is  of  beneficial  ten- 
dency as  it  will  to  suppress  what  is  mischievous. 


16 


THE  INTERSTATE  COMMERCE  ACT-POOLlNG 
AND  COMBINATIONS  WHICH  AEEECT 
.      ITS  OPERATION. 

By  Hon.  Thomas  M.  Cooley. 

I  believe  I  am  expected  to  say  something  on  the  subject  of 
Combinations  and  Concentrations  of  Interests  with  special  refer- 
ence to  the  business  of  transportation  of  persons  and  property  by 
railroad.  The  occasion  for  saying  anything  may  be  attributed,  I 
suppose,  to  the  desire  now  being  expressed  in  some  quarters 
that  the  act  to  regulate  commerce  should  be  repealed,  or  at  least 
be  amended  by  striking  out  certain  clauses  which  are  supposed  to 
bear  heavily  on  the  railroads. 

I  do  not  understand  that  the  question  of  the  repeal  of  the  act 
is  to  be  discussed  at  this  time,  and  if  it  were,  I  do  not  know  that 
I  should  care  to  speak  upon  it.  I  may  say,  however,  that  the  act 
has  a  good  purpose  in  view ;  It  was  intended  to  correct  enormous 
abuses  previously  existing ;  but  they  cannot  be  corrected  without 
cutting  off  some  sources  of  improper  income.  These  did  not  all 
accrue  to  the  benefit  of  the  railroads  or  of  railroad  men ;  other 
classes  profited  upon  them  also,  and  it  is  expecting  altogether 
too  much  to  suppose  that  they  will  acquiesce  in  the  sources  of 
their  illegitimate  profits  being  cut  off  without  making  an  effort  to 
retain  them.  The  reform  therefore  which  the  law  intends  must 
embrace  other  classes  besides  those  who  are  in  railroad  service, 
and  it  must  be  expected  that  others  besides  railroad  men  will  for 
personal  reasons  desire  to  get  rid  of  it. 

The  urgent  call  for  a  modification  of  the  act  which  comes  from 
railroad  circles  has  sprung  up  recently.  There  were  indeed  some 
objections  made  to  it  immediately  after  its  passage  as  well  as  be- 
fore, but  when  it  was  given  effect  it  was  found  quite  to  the  sur- 
prise of  some  who  had  prophesied  disaster  to  the  railroads  from 
it  that  the  disasters  did  not  follow.  Indeed  for  six  months  or 
more  after  the  act  took  effect  it  was  generally  conceded  it  helped 
the  railroads  instead  of  harming  them.  They  gained  in  revenue 
from  the  anti-discriminating  clauses  more  than  they  lost  from  the 

Address  delivered  at  a  dinner  given  by  the  Boston  Merchants'  Association,  January  8,  1889. 


POOLING  AND  COMBINATIONS.  243 

prohibition  of  the  greater  charge  upon  the  shorter  haul.  Every- 
one ought  to  have  been  gratified  with  this,  because  the  gain  to 
the  roads,  was  not  at  the  expense  of  the  general  public ;  it  was, 
on  the  other  hand,  to  their  advantage,  because  it  was  a  gain  re- 
sulting principally  from  taking  away  unfair  advantages  which  be- 
fore were  benefitting  favored  persons  at  the  expense  of  others 
upon  whom  the  burden  was  proportionally  increased. 

I  desire  to  call  special  attention  to  this  fact ;  that  the  period 
during  which  the  law  operated  most  to  the  benefit  of  the  railroads 
was  precisely  that  during  which  its  provisions  were  best  observed. 
I  think  this  to  be  an  undeniable  fact ;  and  if  it  is  a  fact,  it  is  de- 
serving of  more  attention  than  up  to  this  time  it  has  received 
from  the  managers  of  railroads.  It  was  also  the  period  during 
which  the  law  was  complained  of  the  least. 

There  are  very  vigorous  complaints  now.  They  relate  mainly 
to  the  clause  of  the  act  which  forbids  the  greater  charge  on  the 
shorter  haul  on  the  same  line  in  the  same  direction  where  the 
circumstances  and  conditions  are  similar,  and  that  which  makes 
pooling  unlawful.  The  first-mentioned  clause  embodies  a  prin- 
ciple right  in  itself.  In  large  sections  of  the  country  the  roads 
have  come  into  conformity  with  it  and  not  suffered  loss  from 
doing  so.  In  others  it  was  not  practicable  to  do  so,  at  least  im- 
mediately. But  the  difficulties  are  greatly  increased  by  the  ex- 
cessive competition  of  the  roads  at  leading  points,  and  they  will 
diminish  as  the  managers  come  to  better  understanding  among 
themselves.  The  provision  does  not  establish  an  iron  rule ;  it  is 
meant  to  be  sufficiently  elastic  to  operate  justly,  and  if  the  man- 
agers give  their  best  efforts  to  come  into  conformity  with  it,  they 
will  be  very  likely  to  find,  perhaps  to  their  surprise,  that  they 
can  do  so  without  injury.  What  they  lose  in  one  way  they  will 
make  up  in  others. 

But  the  chief  reason  the  railroad  managers  bring  forward  for 
an  amendment  of  the  law  concerns  the  matter  of  pooling.  The 
privilege  of  pooling  is  supposed  by  them  to  be  of  vital  import- 
ance, and  their  opinions  on  the  subject  are  entitled  to  respectful 
consideration. 

I  have  referred  to  the  fact  that  the  law  was  best  observed  at 
the  outset.  But  in  a  few  months  it  began  to  be  noticed  that 
many  persons  in  railroad  service  were  giving  more  attention  to 
contrivances  for  evading  the  spirit  and  intent  of  the  law  than 
they  were  to  obeying  it.  Their  ingenuity  in  this  regard  may  al- 
most be  pronounced  marvelous;  the  old  mischiefs  were  repro- 
duced under  new  guises  just  so  far  as  plausible  excuses  could  be 
invented  for  the  purpose.  One  curious  feature  of  the  sort  of  rail- 
road management  that  was  indulged  in  was  that  the  methods  that 
were  devised  for  evading  the  law  instead  of  increasing  the  pecun- 
iary returns  from  railway  service  almost  invariably  diminished 
them.     A  secret  rebate  made  to  a  favored  dealer  does  not  increase 


244  POOLING  AND  COMBINATIONS. 

the  aggregate  of  railroad  shipments,  and  is  therefore  a  total  loss 
to  railroad  revenues.  When  property  is  allowed  to  go  forward 
under-billed,  there  is  a  like  loss.  If  any  member  of  the  Associa- 
tion had  been  in  Chicago  a  few  weeks  ago  and  had  had  occasion 
to  look  into  one  of  the  general  railroad  ticket  offices  he  might 
have  thought  that  all  travel  had  ceased,  for  nobody  seemed  to  be 
calling  for  tickets.  In  the  ''cut-rate"  office  across  the  way, 
however,  he  might  have  discovered  a  very  different  condition  of 
things.  It  was  the  scalpers  who  were  selling  the  tickets,  and 
they  were  doing  so  on  such  terms  as  enabled  them  to  grow  rap- 
idly rich  while  the  roads  were  growing  poor. 

I  know  of  no  reason  for  supposing  that  the  general  travel  of 
the  country  was  increased  through  the  assistance  of  this  class  of 
men,  and  so  far  as  could  be  seen  the  commissions  paid  were  alto- 
gether lost.  Very  likely  some  roads  lost  more  than  others  through 
the  improper  diversion  of  revenue  from  their  treasuries ;  possibly 
some  of  them  may  have  been  actual  gainers  by  their  illegitimate 
courses ;  but  the  probabilities  are  all  against  it. 

Any  misconduct  of  this  sort  on  the  part  of  one  road  is  imitated 
at  once.  The  general  practice  has  been  for  each  road  to  give  re- 
bate for  rebate,  make  cut  for  cut,  and  in  the  end  the  account  of 
profits  and  losses  shows  gains  by  no  one.  It  is  all  loss,  and  all 
the  roads  share  it. 

These  things  are  done  in  ways  supposed  not  to  be  actually 
criminal  under  the  law,  but  the  whole  business  is  very  plainly 
opposed  to  the  spirit  of  the  law,  and  it  is  done  with  a  pur- 
pose of  evasion.  The  law  intends  that  the  rates  for  the  transpor- 
tation of  persons  and  property  shall  be  the  same  for  all  classes 
and  shall  be  steadily  maintained.  It  also  intends  that  the  rail- 
road business  of  the  country  shall  be  done  openly  and  with  full 
publicity.  This  equal  and  just  purpose  of  the  law  is  defeated  by 
contrivances  that  are  clearly  opposed  to  the  intent  of  the  law  if 
not  to  its  terms. 

Now  when  parties  are  thus  busy  in  contriving  methods  for  ren- 
dering the  law  of  no  effect,  and  their  evasions  of  its  purpose  are 
seen  to  have  a  direct  tendency  to  diminish  the  corporate  rev- 
enues, they  are  hardly  the  parties  to  put  themselves  upon  the 
stand  to  prove  that  the  law  is  injuring  their  roads.  Besides,  the 
evidence  they  bring  forward  is  not  to  the  point. 

We  can  all  see  that  the  old  practices  which  the  law  undertook 
to  put  an  end  to,  but  which  are  still  persisted  in,  are  harmful. 
What  we  need  to  be  shown  is  that  the  fruits  of  obedience  to  the 
law  would  be  equally  injurious,  or  perhaps  more  so.  These  are 
precisely  the  proofs  that  are  not  brought  forward. 

The  reply  made  to  us  when  this  is  said  is  that  the  disregard  of 
legal  obligations  comes  from  excessive  competition.  Formerly 
this  was  kept  within  bounds  by  the  device  of  pooling,  but  pooling 
is  now  prohibited,  and  there  are  no  means  within  the  reach  of  the 


POOLING  AND  COMBINATIONS.  .  245 

railroads  to  protect  them  against  rate  wars.  These  wars  will 
break  out  inevitably,  and  when  they  do  the  roads  will  reach  for 
traffic  by  every  available  means.  If  one  gives  rebates  another 
will :  if  one  puts  its  passenger  tickets  into  the  hands  of  outside  par- 
ties its  competitor  is  compelled  to  do  the  same.     This  is  the  plea. 

Putting  aside  for  the  time  being  the  question  whether  pooling 
ought  or  ought  not  to  be  allowed,  I  must  insist  that  the  argument 
now  made  for  it  is  radically  unsound  and  vicious,  because  it  rests 
upon  an  assumption  that  violation  of  law  by  one  is  justification 
for  violation  by  another.  The  sentiment  in  railroad  circles  on 
this  subject  is  not  only  opposed  to  sound  public  morality,  but  it 
necessarily  tends  to  the  perpetuation  of  the  very  evils  under 
which  the  roads  are  now  suffering. 

Every  man  ought  to  be  a  law-abiding  citizen ;  railroad  managers 
just  as  much  as  any  other  class  of  persons.  Violation  of  a  law 
which  has  a  just  purpose  in  view,  and  especially  of  any  provision 
of  the  law  that  is  unmistakably  just  and  right  in  itself,  ought  to 
be  odious.  Any  citizen  knowing  of  the  violation,  instead  of  imi- 
tating it,  ought  to  assist  in  bringing  the  offender  to  justice.  If 
the  violation  particularly  affects  any  one  business,  the  persons 
engaged  in  that  business  ought  to  feel  themselves  under  special 
obligation  to  see  not  only  that  the  crime  is  punished,  but  that  it  is 
made  disreputable.  If  a  sentiment  to  any  such  effect  exists  in 
railroad  circles  it  has  not  been  made  known  outside  of  them.  In 
saying  this  I  wish  distinctly  to  be  understood  that  I  do  not  join  in 
any  general  indictment  of  railroad  managers.  I  understand  too 
well  that  a  great  many  among  them  desire  that  the  law  shall  be 
enforced,  and  would  willingly  obey  it  to  the  letter  if  they  thought 
under  the  circumstances  they  could  do  so,  but  many  even  of  these 
are  affected  by  the  old  notions  growing  out  of  old  and  chronic 
abuses,  and  when  a  competitor  breaks  the  law  they  do  not  hesitate 
to  do  the  same  thing  in  order  to  get  even  with  him.  The  crime 
thus  spreads  from  one  to  another  until  all  are  involved.  Each  one 
justifies  his  own  conduct  by  the  bad  conduct  of  the  one  who  pre- 
ceded him  in  disobedience  or  is  supposed  to  have  done  so.  He 
would  have  us  understand  that  he  would  not  have  done  what  he 
did  if  he  had  been  a  free  agent,  but  what  the  other  had  done 
left  him  no  choice  but  to  follow  the  example.  He  was  thus  com- 
pelled to  violate  the  law  because  another  did,  and  he  fails  to  rec- 
ognize an  obligation  as  a  citizen  either  to  institute  prosecutions 
himself  or  to  furnish  the  evidence  on  which  the  public  authorities 
can  prosecute. 

Now  I  know  nothing  corresponding  to  this  in  other  lines  of  bus- 
iness. If  one  merchant  cheats  his  competitor  by  dishonest  and 
criminal  means  the  latter  does  not  retort  in  kind,  but  hands  the 
case  over  with  the  proofs  to  the  public  prosecutor.  We  never 
hear  from  one  merchant  that  the  criminal  conduct  of  his  compet- 
itor forces  him  into  like  conduct.     The  plea  of  a  saloon  keeper 


246  .  POOLING  AND  COMBINATIONS. 

who  should  throw  open  his  doors  at  forbidden  hours  because  he 
found  his  rival  had  a  back  door  open  and  was  likely  to  draw  away- 
business,  would  be  overruled  as  promptly  by  public  sentiment  as 
it  would  be  by  the  courts. 

Even  where  an  alleged  secret  cut  in  rates  is  met  in  a  perfectly 
legal  manner,  by  an  open  reduction,  the  question  often  remains 
whether  the  alleged  offense  was  not  imaginary  rather  than  real ; 
and  whether,  if  not,  it  would  not  have  been  possible  to  correct  it 
by  an  appeal  to  the  law  instead  of  making  a  costly  sacrifice  of  rev- 
enues by  measures  of  retaliation. 

We  see  in  these  facts  the  radical  error  on  the  part  of  many  who 
are  now  saying  that  pooling  is  indispensable  to  railroad  harmony 
and  prosperity.  The  evidences  they  bring  forward  do  not  prove 
or  tend  to  prove  the  fact.  They  only  prove  that  they  themselves 
have  been  culpable  in  failing  to  give  the  law  the  proper  support : 
in  failing  to  make  the  effort  fairly  required  of  them  to  render  the 
law  beneficial  to  themselves  and  to  the  public  with  that  privilege 
denied.  A  duty  to  this  effect  rested  upon  them  as  citizens,  but 
also  specially  and  particularly  because  they  were  in  the  manage- 
ment of  great  properties  charged  with  a  public  trust. 

But  putting  this  aside  for  the  present,  we  need  when  one 
pleads  for  the  privilege  of  pooling  to  be  informed  exactly  what  it 
is  that  he  means  by  it.  The  term  is  used  in  very  different  senses 
nowadays.  Does  he  mean  the  voluntary  pooling  as  formerly 
practiced,  and  which  existed  without  any  legal  basis ;  or  does  he 
mean  pooling  sanctioned  by  lav/  with  the  power  of  enforcing  the 
pooling  contracts?  Or  does  he  perhaps  mean  something  quite 
different  from  either,  vSomething  in  the  nature  of  a  trust?  It  is 
very  important  that  we  should  have  definite  information  on  this 
subject  before  pooling,  vaguely  suggested,  is  either  condemned 
or  indorsed. 

The  old  pooling  was  never  so  harmful  as  some  persons  sup- 
posed, and  was  probably  condemned  by  law  more  because  of  what 
it  was  feared  it  would  become,  or  might  become,  than  because  of 
what  it  was.  But,  on  the  other  hand,  it  was  never  so  beneficial 
to  the  roads  as  it  is  now  customary  to  claim.  The  most  that  can 
be  said  in  its  favor  is  that  it  had  a  tendency  to  the  steady  main- 
tenance of  rates.  It  was  a  contrivance  whereby  it  was  made  to 
the  interest  of  roads  not  to  push  competition  to  excess,  and  not 
to  engage  in  destructive  rate  wars.  But  in  order  to  have  pooling 
it  was  necessary,  in  the  first  place,  to  agree  upon  a  basis ;  and 
this  agreement  was  not  always  possible.  And  when  the  basis  was 
agreed  upon  it  had  no  stability ;  it  had  no  legal  support ;  it  de- 
pended for  its  existence  from  day  to  day  upon  the  continuous 
consent  of  parties.  The  result  was  that  pooling  agreements  were 
constantly  being  broken  up,  and  the  most  destructive  rate  wars 
in  railroad  history  occurred  before  pooling  was  prohibited.  The 
little  practical  value  of  the  old  device  was  often  confessed  by  those 


POOLING  AND  COMBINATIONS.  247 

who  made  greatest  efforts  to  render  it  effectual.  This  fact  is  not 
to  be  ignored  in  the  talk  for  restoring  it.  • 

For  a  very  large  proportion  of  railroad  controversies  voluntary 
pooling  cannot  possibly  be  a  remedy,  for  the  very  obvious  reason 
that  they  concern  matters  which  have  to  be  settled  before  there 
can  be  any  pooling.  They  concern  the  substructure,  so  to  spe  ak. 
Take,  for  illustration,  the  difficulties  that  have  existed  in  Trunk- 
Line  territory  during  the  last  year.  They  concerned  the  basis: 
they  related  to  controversies  which  had  to  be  determined  as  a  pre- 
liminary step  to  any  pooling;  so  that,  so  far  as  we  can  see,  the 
controversies  would  have  run  their  course  and  been  just  as  active 
and  violent  with  the  right  to  pool  in  existence  as  they  were  with- 
out it.  And  the  peculiarity  of  railroad  service  is  such  that  con- 
troversies of  the  sort  are  never  really  settled,  for  pooling  itself 
only  establishes  a  temporary  truce  in  respect  to  them. 

Let  us  see  what  pooling  involves. 

It  is  desired  to  establish  it,  we  will  say,  in  Trunk-Line  territory. 
There  are  some  strong  lines  there  and  some  very  weak  ones ;  there 
are  short  lines  and  long;  there  are  direct  roads  for  the  business 
between  leading  points,  and  there  are  roads  twice  as  long  which 
nevertheless  demand  a  share  of  the  business.  There  are  local 
roads  which  have  fair  claim  to  nothing  but  local  business,  but 
which  are  nevertheless  capable  of  being  made  links  of  long  but 
circuitous  lines,  and  of  thus  becoming  disturbers  of  rates  for  the 
whole  territory.  The  problem,  when  pooling  is  proposed,  is  how 
to  satisfy  all  the  parties ;  how  to  apportion  the  business  so  that  all 
will  be  content  and  remain  so.  And  at  the  outset  it  must  be 
understood  that  there  is  not  business  enough  to  make  them  all 
profitable,  and  inevitably  some  must  have  precarious  existence. 

To  expect  to  satisfy  all  under  such  circumstances  is  as  vain  as 
to  expect  to  satisfy  a  miscellaneous  collection  of  carniverous  beasts 
by  dividing  among  them  a  carcass  which  is  insufficient  to  more 
than  whet  their  appetite.  Content  with  the  division  is  out  of  the 
question.  Each  will  take  what  is  allotted  to  it  if  it  sees  no  chance 
of  getting  more,  but  with  such  mental  protests  as  will  make  it 
eager  to  embrace  any  circumstance  which  seems  to  give  promise 
of  a  better  division  if  the  pool  is  broken  up.  And  such  circu  m- 
stances  are  constantly  presenting  themselves.  The  pooling  f  am  ily 
is  very  seldom  a  happy*  family;  it  is  seldom,  if  ever,  bound  to- 
gether by  friendly  ties.  Each  considers  his  neighbor  unfair  and 
unjustly  grasping,  and  chafes  under  the  fact. 

Thus  all  the  ^elements  of  disorganization  attend  it  from  the 
start.  Moreover,  the  most  perfect  pool  is  liable  to  be  invaded 
by  means  of  arrangements  that  may  seem  altogether  unnatural 
and  yet  be  very  effective.  The  Canadian  Pacific,  notwithstand- 
ing its  enormous  length  of  line,  showed  itself  quite  capable  of 
dictating  terms  to  the  American  transcontinental  roads  in  respect 
to  business  between  San  Francisco  and  the  cities  of  the  interior; 


248  POOLING  AND  COMBINATIONS. 

and  a  pool  which  should  embrace  all  the  lines  of  the  Northwest 
might  find  its  arrangements  broken  in  upon  by  a  line  connecting 
Chicago  and  New  York,  but  made  in  part  by  roads  south  of  the 
Ohio  and  the  Potomac.  There  is  almost  no  limit  to  the  possibil- 
ity of  forming  such  roundabout  lines  as  may  constitute  disturbers 
and  disorganizers  of  rates ;  and  the  ingenuity  in  forming  them  is 
sufficiently  active  to  prevent  pooling  being  more  than  an  experi- 
mental device  for  keeping  the  peace,  whose  duration  is  dependent 
first  on  the  good  faith  of  the  parties,  and  next  upon  the  power  of 
others  to  upset  their  arrangements. 

Pooling  with  a  legal  sanction  would  have  all  the  elements  of 
weakness  that  attended  the  old  pooling  except  one.  When  the 
pool  as  it  used  to  be  formed  broke  up,  there  was  no  enforcing 
such  obligations  as  had  been  incurred  while  it  existed ;  there  was  no 
compelling  payment  of  balances.'  With  a  legalized  pooling  there 
might  be  the  power  to  do  this ;  but  there  would  be  the  same  diffi- 
culty in  forming  the  pool,  the  same  elements  of  disorganization 
would  be  involved,  the  same  continuous  good  faith  would  be 
essential,  and  the  same  possibilities  would  exist  of  fatal  intrusions 
from  outside. 

The  difference  between  a  trust  and  a  pool  is  almost  as  great  as  that 
between  a  despot  on  the  throne  and  the  player  who  mimics  him 
on  the  stage.  I  do  not  understand  that  I  am  expected  to  speak 
particularly  of  trusts.  They  are  of  course  a  feature  of  the  times 
to  which  all  thoughtful  men  must  now  be  giving  some  attention, 
but  at  this  time  I  do  not  care  to  dogmatize  on  the  subject.  A 
few  things  can,  nevertheless,  be  said  of  trusts  without  danger  of 
mistake.  They  are  the  things  to  be  feared.  They  antagonize  a 
leading  and  most  valuable  principle  of  industrial  life  in  their  at- 
tempt not  to  curb  competition  merely,  but  to  put  an  end  to  it. 
The  course  of  the  leading  trust  of  the  country  has  been  such  as  to 
emphasize  the  fear  of  them,  and  the  benefits  that  have  come  from 
its  cheapening  of  an  article  of  commerce  are  insignificant  when 
contrasted  with  the  mischiefs  that  have  followed  the  exhibitions 
in  many  forms  of  the  merciless  power  of  concentrated  capital. 
And  when  we  witness  the  utterly  heartless  manner  in  which 
trusts  sometimes  have  closed  manufactories  and  turned  men 
willing  to  be  industrious  into  the  streets  in  order  that  they  may 
increase  profits  already  reasonably  large,"  we  cannot  help  asking 
ourselves  the  question  whether  the  trust  as  we  see  it  is  not  a  pub- 
lic enemy;  whether  it  is  not  teaching  the  laborer  dangerous  les- 
sons; whether  it  is  not  helping  to  breed  anarchy?  One  thing 
would  seem  manifest :  there  are  some  trusts  whose  members  are 
estopped  from  complaining  of  organized  laborers  when  by  strikes 
or  boycotts  or  any  kindred  means  they  seek  to  force  compliance 
with  their  demands.  They  are  estopped  because  their  own  meth- 
ods have  been  of  like  nature,  and  having  been  employed  with 
greater  skill  and  power,  have  been  generally  more  effective  and 
mischievous. 


POOLING  AND  COMBINATIONS.  249 

Anything  in  the  nature  of  a  trust,  that  should  bring  the  rail- 
roads of  the  country,  or  of  any  considerable  section  of  the  country 
under  a  single  head,  with  irresistible  power  to  divide  business  and 
make  rates,  would  be  more  to  be  dreaded  than  any  other  trust 
ever  formed  or  proposed.  The  reason  is  obvious :  it  would  con- 
trol more  property,  have  more  power  of  controlling  and  coercing 
the  action  of  individuals  and  of  the  public  authorities.  It  would 
besides,  if  formed  now,  in  all  probability  fall  to  the  control  of  that 
class  of  managers  who  in  handling  railroad  property  do  not  hesi- 
tate to  subordinate  law  to  corporate  interests  and  rivalries.  No 
prudent  man  would  give  assent  to  a  railroad  trust  until  he  was 
first  shown  that  very  effective  legal  restraints  had  been  put  upon 
it. 

If  it  were  not  taking  time  unwarrantably,  something  might  be 
said  about  excessive  railroad  building  as  one  of  the  reasons  for 
enormous  recent  losses  on  railroad  stocks.  A  gentleman  of  con- 
siderable experience  remarked  recently,  * '  The  most  profitable 
business  now  is  the  building  of  worthless  railroads ;  no  matter 
how  worthless  if  the  bonds  can  be  sold.  The  projectors  put  noth- 
ing in,  and  they  determine  for  themselves  how  much  they  will 
take  out  for  building."  The  proposal  of  a  new  railroad  is  very 
often  a  mere  confidence  operation.  Many  roads  are  built  that  in- 
stead of  increasing  the  aggregate  value  of  the  railroad  property  of 
the  country,  diminish  it  very  largely.  The  millions  put  into  them 
are  sunk,  and  perhaps  as  many  millions  more  previously  put  into 
roads  which  the  new  roads  make  unprofitable. 

I  trust  that  what  I  have  said  sufficiently  indicates  the  weakness 
of  pooling  as  a  specific  for  railroad  evils.  But  this  further  must 
be  said  of  it.  It  is  not  at  all  probable  that  pooling  will  be  legal- 
ized before  managers  show  first^  a  different  attitude  towards  the 
law,  and  second^  a  better  disposition  to  observe  mutual  engage- 
ments. It  is  right,  at  this  point  that  the  radical  mistakes 
have  been  made.  If  the  obligations  entered  into  in  forming  rail- 
road associations  had  been  observed,  pooling  would  have  been  of 
much  less  moment  than  is  now  contended.  But  the  obligations  in 
many  cases  seem  only  to  have  been  assumed  that  they  might  be 
violated,  and  when  men  guilty  of  the  violation  ask  for  the  legaliza- 
tion of  pooling  to  enable  them  to  obey  the  law  the  request  does  not 
have  a  winning  sound ;  it  repels  votes  instead  of  gaining  them. 
Before  further  law  is  made  at  their  request  they  should  show  a 
purpose  to  obey  the  law  they  now  have.  This  is  the  way  it  is 
likely  to  strike  a  legislative  body.  The  true  method  of  railroad 
management  is  undoubtedly  something  in  the  nature  of  represen- 
tative regulation  under  Government  control,  and  to  this  pooling  is 
not  half  so  essential  as  is  the  creation  of  a  sentiment  in  railroad 
circles  that  will  not  tolerate  the  disregard  or  open  breach  of 
mutual  engagements. 

Many  recent  rate  wars  have  not  had  the  slightest  justification  in 


250 


POOLING  AND  COMBINATIONS. 


either  policy  or  in  morals.  The  railroad  companies  had  not  long- 
since  an  arrangement  regarding  the  transportation  of  emigrants 
which  was  accomplishing  for  them  the  purposes  of  a  pool.  Sud- 
denly it  was  broken  up  and  a  horde  of  harpies  brought  in  to  feed 
upon  railroad  revenues.  An  actual  pool  would  have  been  of  no 
service  there.     The  evils  of  course  did  not  end  when  the  war  did. 

All  these  things  go  to  show  that  something  else  needs  reforming 
besides  the  law.  It  is  poor  reformatory  work  that  the  law  can  do 
in  any  line  of  business  unless  the  moral  forces  in  the  same  busi- 
ness come  to  its  support.  Of  course  effectual  reform  will  neces- 
sarily reach  beyond  railroad  circles.  Large  dealers  who  formerly 
prospered  upon  special  favors  must  be  content  to  forego  them. 
The  bribing  of  a  railroad  servant  to  underbill  goods  or  in  some 
other  way  to  give  an  advantage  to  a  shipper  ought  to  be  as  dis- 
reputable as  the  hiring  of  a  thief  to  steal  a  neighbor's  goods. 

In  an  address  made  by  Charles  Francis  Adams  in  this  city  a  few 
days  since,  that  gentleman  did  not  speak  any  too  strongly  on  this 
general  subject.  And  we  all  know  that  on  railroad  subjects  he 
speaks  from  ample  knowledge  and  experience. 

I  have  spoken  of  the  want  of  reformatory  power  in  the  law.  One 
who  investigates  railroad  disorders  will  be  surprised  to  find  how 
many  of  them,  though  plainly  opposed  to  the  spirit  of  the  law, 
may  still  be  practiced  legally.  Rate  cutting  in  passenger  service 
is  very  largely  done  by  the  use  of  tickets  which  the  law  expressly 
exempts  from  its  provisions,  and  coupon  tickets  are  so  manipulated 
by  one  company  as  to  cut  the  rates  of  another  without  the  other 
being  a  participant  otherwise  than  as  it  suffers  from  a  fraud  prac- 
ticed upon  it,  The  general  ma*nager  of  a  long  line  of  road  who 
was  careful  as  he  thought  to  render  cutting  on  his  line  impossible, 
was  astonished  recently  by  having  a  ticket  broker  to  whom  he  was 
a  stranger  offer  him  a  ticket  over  his  own  line  at  a  cut  rate.  He 
at  first  pronounced  the  ticket  a  forgery ;  but  it  was  not  a  forgery, 
nor  was  it  a  ticket  which  had  been  partly  used ;  it  was  his  part  of 
a  coupon  ticket  which  had  been  put  into  the  hands  of  the  passen- 
ger agent  of  a  distant  road,  and  this  agent  had  cut  it  off  and  passed 
it  to  the  scalper  as  a  means  of  cutting  the  local  rate.  One  of  the 
crying  evils  in  railroad  service  now  needing  attention  is  the  com- 
bination between  the  scalper  and  the  unscrupulous  general  pas- 
senger agent.  This  will  be  broken  up  just  as  soon  as  there  are 
applied  in  railroad  matters  the  same  general  maxims  of  business 
prudence  which  are  expected  to  control  in  other  interests.  If  the 
combination  in  the  same  person  of  the  two  characters  of  railroad 
manager — in  whatever  official  position — and  of  speculator  in  rail- 
road stocks  could  be  rendered  impossible,  we  might  hope  to  see 
the  time  when  the  question  What  is  right  and  wrong  in  railroad 
matters^  would  be  heard  a  good  deal  oftener  than  it  is  now,  and 
the  question  What  can  be  done  in  evasion  of  the  law  without  en- 
countering its  pejialties,  a  good  deal  more  infrequently. 


A  PLEA  rOR  RAILWAY  CONSOLIDATION. 

By  Mr.  Collis  P.  Huntington. 

President  of  the  Southern  Pacific  Railroad  Company. 

The  question  has  often  been  asked  of  railroad  men ;  What  is  the 
remedy  for  rate  wars  and  the  demoralization  that  results  from  the 
rate-cutting  incident  to  their  business  as  at  present  conducted?  I 
know  of  but  one  answer  to  this  question,  and  that  is  consolidation 
or  joint  ownership ;  and  as  the  solution  of  a  purely  business  prob- 
lem I  began  advocating  this  many  years  ago.  The  process  of  con- 
solidation itself  (which  is  simply  the  endeavor  to  secure  the  larg- 
est possible  amount  of  tonnage  and  transport  it  with  the  least 
expenditure  of  money)  is  a  logical  outgrowth  of  circumstances, 
and,  although  the  projectors  of  the  earlier  lines  did  not  perhaps 
foresee  the  advantage,  and  even  the  necessity  of  it,  yet  it  was  not 
long  before  the  natural  tendency  of  railroad  corporations  towards 
unification  of  interests  began  to  manifest  itself. 

There  are  men  now  living  in  the  full  activities  of  life  who  have 
travelled  from  Albany  to  Buffalo  over  the  Albany  and  Schenectady, 
Schnectady  and  Utica,  Utica  and  Syracuse,  Syracuse  and  Auburn, 
Auburn  and  Rochester,  and  Rochester  and  Buffalo  railroads,  all 
of  which  were  connected  in  a  continuous  line  of  track.  But  it 
was  very  soon  discovered  by  the  proprietors  of  these  fragments  of 
roads,  so  to  speak,  that  they  gave  little  return  to  their  owners, 
while  the  result  to  the  people  who  used  them  was  unsatisfactory, 
as  it  was  difficult  to  get  through  rates  of  freight,  and,  when  ob- 
tained, to  locate  the  responsibility  for  damage  to  property,  or  for 
detention  in  transit  from  the  point  of  shipment  to  destination. 

The  disadvantages  arising  from  this  lack  of  unity  have  induced 
a  continuous  effort  from  that  date  to  the  present  time,  on  the  part 
of  the  builders  of  railroads,  to  devise  ways  by  which  the  people 
could  be  better  served  and  the  owners  more  satisfactorily  compen- 
sated for  their  risks  and  outlays  of  capital,  until  the  ablest  men 
have  come  to  the  conclusion  that  the  most  effective,  and  probably 
the  only  practical  remedy  for  the  many  evils  and  demoralizations 
that  now  exist  is  joint  ownership,  as  it  would  appear  that  only  in 
that  way  can  the  minimum  of  cost  of  transportation,  and,  there- 
Reprinted  by  special  permission  from  The  North  American  Review  of  September,  1891. 
Copyrighted  by  Lloyd  Brice,  1891. 


252 


RAILWAY  ASSOCIATIONS. 


fore,  the  maximum  benefit  to  the  public  and  to  the  roads,  be  se- 
cured ;  and  this,  too,  to  use  the  words  of  Lincoln,  ' '  not  rending 
or  wrecking  anything,"  but,  instead  of  this,  creating  harmony  out 
of  discord,  order  out  of  confusion,  and  largely  increasing  the  value 
of  the  property  of  the  stockholders  of  each  road,  each  of  whom 
thus  becomes  a  stockholder  in  the  whole  property. 

Thus  came  into  existence  the  present  New  York  Central  and 
Hudson  River  Railroad,  from  which  the  general  public  has  reaped 
enormous  advantages,  while  the  owners  have  been  rewarded  by 
an  exchange  of  shares  of  little  or  no  worth  for  stock  in  the  new 
organization,  of  vastly  increased  value.  This  great  corporation 
may  be  said  to  represent  the  genius  of  that  giant  of  railway  finance, 
Cornelius  Vanderbilt,  whose  keen  foresight,  indomitable  will,  and 
tireless  energy  combined  to  produce  this  example  of  railway  enter- 
prise. 

The  same  may  be  said  of  that  vast  network  of  roads  controlled 
by  the  Pennsylvania  Railroad  Company,  which  has  been  slowly 
but  steadily  built  up  by  purchase  and  consolidation,  by  the  inter- 
weaving, as  it  were,  of  many  short  roads  of  little  or  no  value  into 
the  completed  fabric  known  as  the  Pennsylvania  system.  To  the 
organizing  force  and  intellect  of  Edgar  Thompson,  and,  after  him, 
of  Colonel  Thomas  A.  Scott,  is  due  this  unparalleled  achievement 
in  the  history  of  railway-building.  That  the  owners  and  mana- 
gers of  these  and  other  large  corporations  of  their  kind  have  been 
able  to  continue  the  success  that  was  guaranteed  by  the  sagacious 
policy  of  their  predecessors  reflects  no  less  credit  on  the  earlier 
actors  than  it  does  upon  their  successors,  who  were  quick  to  per- 
ceive the  wisdom  of  the  policy  and  mentally  equipped  to  carry  it 
out. 

When  both  of  the  great  systems  alluded  to  were  in  the  process 
of  amalgamation  they  were  severely  criticised ;  but  I  think  no  one 
will  at  this  time  dispute  the  fact  that  both  of  the  organizations,  as 
at  present  constituted,  serve,  and  are  able  to  serve,  the  people 
better  than  it  was  possible  for  the  fragmentary  sections  of  which 
they  were  composed,  to  have  done,  and  that  they,  moreover,  give 
much  better  returns  to  those  who  have  invested  their  capital  in 
them.  As  Sidney  Dillon  has  well  said  in  the  April  number  of 
The  Review^  "Combinations  that  do  not  combine,  and  monopolies 
whose  constant  tendency  during  a  long  series  of  years  has  been  to 
bring  producers  and  consumers  into  closer  relations  with  each 
other  and  lessen  the  cost  of  living  to  both,  deserve  praise  and  sup- 
port rather  than  censure  and  adverse  legislation." 

That  this  merging  of  several  properties  into  single  organiza- 
tions is  a  natural  process  of  improvement  is  shown,  also,  by  the 
fact  that  it  is  all  the  time  going  on  and  never  takes  a  step  back- 
ward ;  and  we  have  yet  to  learn  of  a  single  instance  where  it  has 
been  considered  advisable,  either  by  those  financially  interested 
or  by  the  public,  to  disrupt  a  system  thus  consolidated  and  restore 


RAILWAY  ASSOCIATIONS.  253 

it  to  its  original  parts,  or  to  make  any  part  independent  of  the 
others.  Nor  has  the  writer  ever  known  of  a  consolidation  that 
has  not  brought  a  reduction  of  rates,  except  where  there  had  pre- 
viously been  such  a  cutting  of  rates  as  would  inevitably  have 
landed  the  property  into  the  hands  of  a  receiver,  with  all  its  evil 
results  to  both  the  owners  and  the  public,  had  not  sagacious 
councils  arrested  the  impending  ruin. 

It  is  not  for  the  interest  of  the  public  that  property  wisely 
created  and  capable  of  so  much  good  to  the  country  should  be 
used  in  such  a  way  as  to  invite  bankruptcy,  for  by  such  misman- 
agement many  needed  improvements  will  not  be  created.  There 
are  a  few  individuals  in  every  community,  and  probably  always 
will  be,  who  spend  their  lives  in  the  effort  to  find  some  place 
where  they  can  take  up  something  without  laying  anything  down, 
and  to  whom  wasteful,  and  I  might  almost  say  wicked,  competi- 
tion among  railroads  is  welcome,  so  long  as  it  affects  favorably 
their  own  individual  pockets.  From  these  people  opposition  to 
legitimate  transactions  that  are  based  upon  the  principle  of  giving 
the  greatest  good  to  the  greatest  number,  may  always  be  expected ; 
but  I  am  satisfied  that  the  mass  of  the  intelligent  people  of  the 
country  look  with  disfavor  upon  the  unhealthy  strife  between  the 
railroads  of  this  country,  which  has  resulted  not  only  in  no  per- 
manent good  to  the  patrons  of  the  roads,  but  an  irreparable  harm 
to  vested  interests  and  the  interruption  of  that  process  of  devel- 
opment of  the  country's  resources  the  advance  of  which,  under  a 
more  enlightened  policy,  should  be  steady  and  rapid. 

The  time  was  when  people  were  afraid  of  corporations  and 
looked  upon  them  with  jealousy  and  distrust;  but  the  history  of 
the  world's  industry  has,  I  think,  taught  the  majority  of  the  peo- 
ple that  corporations  are  the  means  whereby  the  multitude  can 
combine  for  mutual  benefit  and  protection.  In  no  other  way  can 
they  compete  with  the  vast  capital  that  is  concentrated  in  the 
hands  of  a  few  individuals ;  and,  this  being  so,  the  time  should, 
and  I  believe  will,  soon  come  when  communities  will  call  for  the 
same  treatment  of  corporate  property  that  is  accorded  to  indi- 
vidual possessions.  Then  railroad  corporations  will  not  be  unjustly 
interfered  with  in  the  exercise  of  their  rights,  based  upon  the 
most  obvious  rules  of  business,  by  such  legislation  as  culminated 
some  years  ago  in  the  Interstate  Commerce  Act. 

It  should  be  possible  for  the  railroads  to  move  the  product  of 
the  farm  and  the  lean  ores  of  the  mine  at  a  small  profit  over  train 
expenses,  and  thus  develop  large  and  important  interests,  as  well 
as  accommodate  a  large  number  of  men  by  giving  them  employ- 
ment that  cannot  be  obtained  when  the  rates  on  freight  are  arbi- 
trarily fixed  by  law  so  that  these  products  of  the  farm  and  the 
mine  cannot  be  moved  to  a  market  that  will  take  them.  The 
great  expense  of  operating  a  road  of  light  traffic,  the  construction 
of  which  has  been  somewhat  costly,  consists  not  in  the  actual  ex- 


254 


RAILWAY  ASSOCIATIONS. 


pense  of  running  the  trains  themselves, — which  includes  only  the 
wear  of  the  track  and  machinery,  the  consumption  of  fuel,  oil, 
and  waste,  and  the  wages  of  the  crew, — but  in  the  fixed  charges, 
in  which  are  included  the  interest  on  the  cost  of  property,  the 
taxes  on  the  same,  and  the  maintenance  of  the  different  depart- 
ments connected  with  its  mangement. 

Where  the  price  of  moving  a  ton  of  ore  is  compulsory,  whether 
ore  be  rich  or  lean,  the  rich  will  be  sent  to  market  and  the  poor 
will  remain  at  the  dump,  instead  of  being  removed,  and  thus  pos- 
sibly opening  a  path  to  richer  and  more  remunerative  beds  of  ore ; 
and  in  the  case  of  forest  products,  the  fine  timber  will  be  profit- 
ably taken  out,  without  interfering  with  the  profits  of  the  lumber- 
man, while  the  cheaper  stuff  will  not  be  handled.  Lean  ores  and 
cheap  timber  should  be  moved  at  a  small  profit  over  the  actual 
train  expenses,  but  this  cannot  be  done  under  the  present  law. 
I  believe  the  Interstate  Commerce  Act  has  caused  the  loss  of 
millions  of  dollars  to  the  producer,  as  it  would  seem  evident  that 
no  manager  of  a  railroad  would  fail  to  bring  out  over  his  line  ton- 
nage of  this  character,  the  marketing  of  which  means  so  many 
dollars  to  the  lumberman  and  the  mine-owner,  employment  to 
many  who  must  otherwise  remain  unemployed  and  the  encour- 
agement of  worthy  industries.  These  things  are  so  apparent  that 
they  should  be  understood  by  all. 

With  many  of  the  railroads  of  America,  which  run  through 
large  areas  of  arid  country,  the  problem  of  existence  is  a  hard 
one,  and  the  only  apparent  solution  is  to  secure  something  out  of 
the  bowels  of  the  earth  that  will  bear  transportation ;  and  upon 
the  theory  that  there  is  something  for  man's  use  everywhere,  it 
should  be  found  here  in  the  form  of  ores,  possibly  lean  ores ;  but 
so  long  as  they  will  pay  something  over  train  expenses,  their 
transportation  may  provide  much  work  for  men  and  some  remun- 
eration to  those  who  carry  them. 

The  railroads  known  as  the  overland  or  Pacific  railroads  have 
lost  much  business  because  of  their  inability,  on  account  of  the 
Interstate  Commerce  Law,  to  compete  with  the  Canadian  Pacific, 
which  is  able,  through  the  fostering  care  of  a  paternal  govern- 
ment, unrestricted  by  legislation,  to  bid  for  business  on  better 
terms  than  its  American  rivals.  The  struggle  between  the  dif- 
ferent companies  is  not  for  the  interest  of  a  majority  of  the  people 
who  use  the  railroad,  as  the  very  large  shippers  at  the  great  com- 
peting points  reached  by  two  or  more  roads  get  an  immediate 
benefit  from  the  reduction  of  rates,  while  the  small  dealers  are 
injured  in  their  business  to  a  very  considerable  extent.  Assume 
that  a  hundred  men  are  dealing  in  some  particular  commodity. 
Ninety-nine  of  them  may  each  have  a  car-load,  or  less,  to  ship, 
which  is  not  enough  to  make  it  an  object  for  them  to  go  and 
*'shop  "  among  the  different  transportation  companies  for  rates; 
and  if  they  did,  the  tonnage  is  not  enough  to  make  it  an  induce- 


RAILWAY  ASSOCIATIONS.  255 

ment  for  the  companies  to  cut  the  rate  in  their  favor ;  but  one 
man  who  has,  as  is  sometimes  the  case,  five  hundred  car-loads  to 
ship  is  vitally  interested,  and  he  accordingly  goes  about  among 
the  various  roads  until  he  finally  succeeds  in  obtaining  the  desired 
rebates.  This  not  only  takes  money  from  the  railroad  itself,  but 
does  great  harm  to  the  small  shippers,  who  are  crowded  out  of  the 
market  or  compelled  to  sell  their  product  at  less  net  profit  than  they 
are  fairly  entitled  to.  The  shippers  who  live  along  the  line  away 
from  these  competing  centres  are  compelled  to  pay  more,  as  the 
sums  lost  at  the  competing  points  must  be  recouped  to  prevent 
the  railroad  company  from  going  into  bankruptcy,  as  very  few  of 
the  small  roads  of  the  country  are  paying  anything  beyond  their 
current  and  fixed  expenses,  leaving  nothing  for  the  holders  of 
the  shares. 

What  possible  remedy  is  there  for  such  a  state  of  things  except 
joint  ownership?  As  a  simple  business  proposition,  it  seems  to 
me  unanswerable,  for,  by  its  application,  it  can  be  readily  seen 
that  much  of  the  expense  of  maintaining  separate  organizations 
and  separate  offices  will  be  cut  off,  and  a  great  multitude  of  agents 
and  agencies  will  be  dispensed  with.  On  the  one  side  of  the  people 
quite  as  much  good  will  be  the  outcome.  The  complaint  of  charg- 
ing more  for  a  short  than  for  a  long  haul,  which  comes  from  the 
shipper  located  between  instead  of  at  the  important  centers,  will 
cease  to  be  heard,  because  the  pernicious  system  of  giving  rebates 
and  commissions,  or  whatever  they  may  be  called,  that  cost  the 
roads  so  much  money  and  really  do  their  patrons,  as  a  whole,  so 
much  harm,  will  no  longer  be  practised,  the  excuse  or  necessity 
therefor  no  longer  existing. 

While  the  uniting  of  small  roads  has  been  productive  of  great 
benefits  to  the  owners  and  to  the  public  who  use  them,  yet  I  am 
satisfied  that  the  best  results  may  not  be  reached  until  sub- 
stantially all  the  transportation  business  of  this  country  is  done  by 
one  company.  The  accomplishment  of  this  would  reduce  the  cost 
of  transportation  to  the  minimum  which  would  admit  of  the  lowest 
possible  rates  to  shippers  and  passengers.  There  would  be  no 
longer  any  necessity  of  charging  more  for  a  shoit  than  for  a  long 
haul,  except  where  water  competition  existed,  as  the  crossing  of 
railroads  at  various  points  would  have  no  further  effect  upon  the 
rate  schedules. 

The  raising  of  rates  at  non-competing  points  is  one  of  the  things 
done  by  railroads  which  it  is  hard  to  explain  to  the  satisfaction  of 
those  who  buy  transportation ;  but  it  will  continue  to  be  done  as 
long  as  railroads  are  controlled  by  scattered  interests,  and  neither 
agreements  nor  laws  will  entirely  prevent  it.  If,  on  the  contrary, 
all  the  railroads  of  the  country  were  held  in  joint  ownership,  they 
would  need  much  less  rolling  stock  than  is  now  required,  as  the 
staple  crops  of  the  country  are  moved  at  different  seasons  of  the 
year,  and  cars  and  locomotives  could  be  transferred  from  one  sec- 


256  RAILWAY  ASSOCIATIONS. 

tion  to  another  as  needed,  thus  saving  a  large  amount  of  capital 
which  otherwise,  for  a  considerable  portion  of  the  year,  would  be 
idle. 

There  is  another  feature  of  this  question  that  is  perhaps  hardly- 
taken  into  account  in  the  public  mind,  because  its  bearing  upon  it 
appears,  at  first  glance,  to  be  remote ;  but  we  are  dealing  with  a 
problem  of  the  future,  and  the  time  is  coming  wiien  its  close  re- 
lation to  it  will  be  appreciated.  The  existence  of  an  undoubted 
security  for  institutions  and  for  the  great  mass  of  conservative  in- 
vestors of  limited  means,  who  demand  above  all  other  qualifica- 
tions a  security  that  shall  be  safe,  and  who  rely  upon  their  invest- 
ments for  the  incomes  which  are  to  support  themselves  and  their 
families,  is  soon  to  become  a  necessity  in  America.  Our  govern- 
ment bonds  are  constantly  being  called  in  and  cancelled,  whilst 
the  surplus  capital  of  the  country  is  continually  increasing.  Unless 
a  stable  and  safe  security  for  the  multitude  is  forthcoming,  it  does 
not  need  the  astuteness  of  a  financier  to  comprehend  the  possible 
situation  of  the  future  when  the  investor  who  seeks  an  assured  in- 
come from  his  savings  will  have  to  place  his  reliance  upon  the 
wisdom  of  his  own  selection  among  a  list  of  many  hundreds  of 
railway  stocks  and  bonds,  subject  to  all  the  serious  fluctuations 
that  follow  in  the  wake  of  selfish  competition  and  inefficient  man- 
agement, r^l 

The  writer  has  never  regarded  the  existence  of  a  large  national 
debt  as  an  evil  in  a  prosperous  and  growing  country  like  the 
United  States,  whose  obligations  do  not  affect  the  credit  of  the 
government  and  are  not  significant  of  any  financial  embarrassment ; 
but  our  people  have  decided  otherwise,  perhaps  not  unwisely; 
nevertheless  there  must  be  a  substitute  for  the  people  to  invest 
their  savings  in — a  security  that  shall  possess  the  confidence  of 
the  entire  public.  What  shall  it  be?  It  seems  to  the  writer  that 
nothing  will  be  safer  than  shares  or  bonds  of  the  united  railroads 
of  this  country,  and  few,  if  any,  other  securities  will  be  so  easy  to 
negotiate  or  raise  money  on.  If  this  true,  why  should  not  a  very 
large  number  of  the  people  who  use  these  roads  invest  their  money 
in  such  an  organization,  and  thus  become,  to  a  large  extent,  the 
owners  and  controllers  of  the  railroads  that  they  use? 

Ours  is  a  vast  country,  and  no  doubt  produces  more  and  a 
greater  variety  of  food  for  man  than  any  other  nation  on  the  earth. 
All  are  interested — those  who  produce  and  those  who  consume — 
in  having  the  enormous  tonnage  of  food  gathered  and  distributed 
at  the  lowest  possible  cost.  How  to  do  it  is  the  question  that  all 
want  to  see  solved.  It  was  once  believed  by  many,  and  it  may 
still  be  thought  by  a  very  few,  that  if  the  farmer  had  no  machinery 
for  reaping,  sowing,  and  gathering  his  grain,  many  would  get  em- 
ployment and  thereby  be  helped,  even  if  it  cost  something  more 
to  produce.  Is  there  any  one  who  would  be  benefited  by  having 
the  transportation  cost  more  than  the  least  possible  sum  for  which 


RAILWAY  ASSOCIATIONS.  257 

the  product  of  the  farm  could  be  moved?  If  that  be  so,  let  us  all 
look  for  that  way.  It  cannot  be  done  by  little  fragmentary  com- 
panies, for  they  cannot  practise  the  economies  of  wealth,  as  their 
poor  road  beds,  crippled  rolling  stock,  and  lean  management  will 
testify.  What  is  wanted  is  not  more  than  two  or  three — and  one 
would  be  better — great  carrying  companies,  with  their  steel  tracks 
and  road  bed  as  nearly  perfect  as  they  can  be,  with  all  their  ma- 
chinery of  the  best  quality,  with  their  capacious  warehouses  at  in- 
termediate points,  and  their  almost  unlimited  terminal  facilities. 
With  the  best  talent  in  the  country  to  manage  and  control  such  an 
organization,  many  millions  could  be  saved  to  those  who  use  the 
railroads  of  this  country,  and  millions  also  to  those  who  own  them 
over  what  is  now  being  received  by  the  fragmentary,  badly- 
equipped,  and  inefficiently-managed  roads  that,  with  but  few  ex- 
ceptions, now  exist. 

Some  fears  have  been  expressed  that  the  great  transportation 
companies  of  this  country  would  override  the  rights  of  the  people ; 
but  surely  there  need  be  no  apprehension  of  that,  as  certainly 
there  is  no  danger.  Any  capitalist,  or  combination  of  such,  would 
be  weak — yes,  worse  than  weak — to  make  the  effort  to  stand  be- 
tween the  people  and  their  rights,  and  I  am  quite  sure  that  few 
honest  and  intelligent  citizens  fear  any  such  combination.  To  be 
sure,  there  are  demagogues  who  cry  "  Monopoly!  "  and  assert  that 
the  great  corporations  are  about  to  override  the  liberties  of  the 
people;  but  solicitude  for  the  people  is  not  the  real  reason  of  their 
outcry.  It  is  because  they  hope  to  climb  up  on  the  noise  they 
make  into  high  places,  and  into  seats  that  they  are  not  worthy  of 
and  have  not  the  ability  to  fill. 

The  branch  of  the  government  in  which  all  good  people  have 
faith — the  sheet  anchor,  so  to  speak,  of  all  we  hold  dear — the  ju- 
dicial department  of  the  government,  will  stand  between  the 
rights  of  the  many  and  the  few,  and — what  is  even  more  import- 
ant, because  the  danger  is  greater — will  see  that  the  rights  of  the 
few  are  protected  against  the  improvident,  and  hence  impecunious, 
many.  The  rights  of  all  should  be  and,  I  believe,  will  be  pro- 
tected.    If  not  all,  very  soon  none. 

In  the  general  trial  of  Warren  Hastings,  Edmund  Burke  ad- 
dressing the  House  of  Lords,  is  reported  to  have  said:  "  It  is  well 
for  you  to  remember,  gentlemen,  that  if  the  time  should  ever 
come  when  British  law  does  not  protect  the  life,  the  liberty,  and 
the  property  of  the  humblest  Hindoo  upon  the  banks  of  the  Gan- 
ges, no  nobleman  will  be  safe  on  the  banks  of  the  Thames. " 

Justice  Brewer,  of  the  United  States  Supreme  Court,  lately  de- 
livered an  important  address  that  should  be  read  by  every  Ameri- 
can citizen ;  and  amongst  other  things  he  said : 

"  Public  attack  upon  private  property  appears  conspicuously  under  the  guise 
of  regulation,  where  charges  for  the  use  are  so  reduced  as  to  prevent  a  reason- 
able profit  on  the  investment.     The  history  of  this  question  is  interesting. 

17 


258 


RAILWAY  ASSOCIATIONS. 


Certain  occupations  have  long  been  considered  of  a  quasi-public  nature — 
among  these,  principally  the  business  of  carrying  passengers  and  freight.  Of 
the  propriety  of  this  classification  no  question  can  be  made.  Without  inquir- 
ing into  the  various  reasons  therefor,  a  common  carrier  is  described  as  a  quasi- 
public  servant.  Private  capital  is  invested,  and  the  business  is  carried  on  by 
private  persons  and  through  private  instrumentalities ;  yet  it  is  a  public  service 
which  they  render,  and  by  virtue  thereof  public  and  government  control  is 
warranted.  The  great  common  carriers  of  the  country,  the  railroad  companies, 
insisted  that,  by  reason  of  the  fact  that  they  were  built  by  private  capital  and 
owned  by  private  corporations,  they  had  the  same  right  to  fix  the  prices  for 
transportation  that  any  individual  had  to  fix  the  price  at  which  he  was  willing  to 
sell  his  labor  or  his  property.  After  a  long  and  bitter  struggle,  the  Supreme 
Court  of  the  United  States,  in  the  celebrated  '  Granger '  cases,  reported  in  94 
U.  S.,  sustained  the  power  of  the  public  and  affirmed  legislative  control. 

"  The  scope  of  this  decision,  suggestmg  a  far-reaching  supervision  over  pri- 
vate occupations,  brought  vigorously  up  the  question  as  to  its  extent.  On  this 
line  the  struggle  was  again  renewed  and  carried  10  the  Supreme  Court,  which 
in  the  recent  case  of  Railway  Company  vs.  Minnesota,  134  U.  S.,  418,  decided 
that  regulation  did  not  mean  destruction ;  and  that  under  the  guise  of  legisla- 
tive control  over  tariffs,  it  was  not  possible  for  state  or  nation  to  destroy  the  in- 
vestments of  private  capital  in  such  enterprises ;  that  the  individual  had  rights 
as  well  as  the  public,  and  rights  which  the  public  could  not  take  from  him. 
The  opinion  written  in  that  case  by  Justice  Blatchford,  sustained  as  it  was  by 
the  court,  will  ever  remain  a  strong  and  unconquerable  fortress  in  the  long 
struggle  between  individual  rights  and  public  greed." 

What  has  been  said  in  this  article  of  those  who  deal  in  the 
products  of  the  forest  and  mine  applies  to  an  even  greater  extent 
to  the  farmer  and  herdsman.  Flexibility  in  the  carrying  rates  is 
needed,  and  there  are  many  reasons  why  this  should  be  so ;  for  the 
farmer  often  has  poor  crops^  frequently  the  market  therefor  is  too 
low,  and  the  best  interest  of  the  transportation  company  lies  in  help- 
.  ing  him  over  these  lean  places,  as  it  gives  him  heart  to  enter  the  year 
that  is  to  follow  with  courage  to  plant  largely,  in  the  hope  that,  ■ 
when  the  harvest  time  comes  again,  he  will  have  a  larger  output, 
with  better  prices,  and  thus  be  able  to  recover  the  loss  of  the  pre- 
vious season ;  while  those  who  control  the  carrying  companies  and 
who,  by  their  protective  policy,  have  helped  the  farmer  in  the 
hour  of  his  trouble  and  made  him  happy,  would  look  back  with 
satisfaction  upon  the  wisdom  of  their  own  action,  which  has  given 
them  a  continuing  business,  for  nothing  is  much  worse  than  having 
the  cars  and  machinery  of  a  railroad  stand  idle  upon  the  tracks. 

Agaiii,  a  great  drouth  may  occur  in  some  sections  of  our  vast 
country,  and  it  becomes  necessary  under  such  circumstances  to 
take  out  from  such  districts  all  the  live  stock  or  to  carry  food  in. 
Should  this  not  be  done,  on  humanitarian  grounds  alone,  for  lower 
rates  than  may  be  charged  in  sections  not  so  afflicted,  and  that, 
too,  without  much  regard  to  the  distance?  And  when  such  con- 
sideration on  the  part  of  the  railroad  company  is  really  advantage- 
ous to  itself  in  the  long  run,  can  there  be  any  doubt  of  its  wisdom? 
What  the  carrying  companies  want  is  a  continuing  business  and  a 
fair  profit  for  each  decade,  and  in  this  reasonable  expectation  they 
should  have  the  right  to  help  their  patrons  during  the  "  off  "  years, 
in  the  common  interest. 


RAILWAY  ASSOCIATIONS.  259 

Now,  all  this  cannot  be  regulated  by  legislation,  however  care- 
fully such  legislation  may  be  devised,  simply  because  no  provision  of 
law  can  anticipate  the  varying  requirements  of  trade.  It  can  only 
be  done  by  working  upon  flexible  lines,  so  to  speak,  letting  prices 
go  up  and  down  as  will  best  serve  the  interests  of  both  contracting 
parties.  Why  should  it  be  otherwise?  The  judicial  branch  of  the 
government  has  decided  that  it  has  the  power,  under  the  Consti- 
tution, to  say  what  is  a  fair  income  for  railroad  and  other  quasi- 
public  institutions  that  do  business  for  and  with  the  public.  Why 
should  state  legislatures  endeavor  to  arbitrarily  fix  the  rates, 
when  no  doubt  the  best  interest  of  both  shipper  and  carrier  will 
be  served  by  a  graduation  of  those  rates  in  accordance  with  the 
changing  conditions  of  business?  Of  all  property  railroads  should 
have  the  largest  freedom,  in  order  that  they  may  be  able  to  earn 
sufficient  to  pay  a  fair  interest  upon  the  capital  invested,  and  to 
earn  it  in  a  way  that  shall  most  nearly  conserve  the  interests  of 
their  patrons  and  themselves.  When  a  fair  return  upon  invested 
capital  has  been  received,  the  people,  through  the  courts,  can  pre- 
vent rates  from  going  up,  and  thus  restrict  the  earnings  of  a  rail- 
road to  reasonable  figures. 

Transportation  companies  can  sometimes  gather  net  money  over 
train  expenses  in  competition  with  water  lines,  and  they  should  be 
allowed  to  do  so,  as  their  permanent  way  is  expensive  and  fixed. 
It  cannot  be  moved.  The  ship  has  its  free  right  of  way  over  all 
the  seas,  on  which  no  taxes  and  no  interest  have  to  be  paid ;  but 
the  railroad  is  often  doubly  burdened  by  a  tax  not  only  upon  its 
shares — which  are  only  the  evidence  of  ownership — but  upon  its 
real  property,  which  is  frequently  assessed  above  its  actual  value. 

In  the  high  dry  lands  in  the  center  of  the  continent  a  few  people 
have  sometimes  confederated  together  and  carved  counties  out  of 
the  desert  where  there  was  no  necessity  for  their  creation,  and 
built  court  houses  and  school  houses  where  they  were  not  needed, 
simply  because  the  establishment  of  these  institutions  gave  them 
the  power  to  tax  the  property  of  the  new  county  to  pay  for  the 
so-called  improvements ;  the  principal,  almost  the  only,  property 
on  which  taxes  could  be  levied  being  the  railroad  by  which  the  so- 
called  county  is  traversed.  And  after  all  this  comes  the  politician 
with  his  demand  for  the  appointment  of  men  who,  though  possess- 
ing no  interest  whatever  in  the  property,  or  knowledge  or  experi- 
ence in  its  management,  shall  practically  control  its  business  by 
fixing  the  rates  of  fares  and  freights.  Surely  the  time  has  come 
to  call  a  halt,  and,  in  the  words  of  the  great  jurist,  for  the  conser- 
vative branch  of  the  government  to  step  in  "between  individual 
rights  and  public  greed. " 


RAILROAD    CONSOLIDATION. 

By  Gen.  E.  P.  Alexander. 

I  am  requested  to  write  my  views  upon  railroad  cousolidation, 
under  circumstances  precluding  any  but  a  very  brief  and  hasty 
presentation.  Yet  it  seems  to  me  that  even  a  very  condensed 
presentation  of  some  leading  facts  may  serve  in  some  degree  to 
assist  those  willing  to  consider  the  railroad  side  of  the  subject. 
So  with  this  much  of  apology  in  advance  for  what  can  be,  at 
best,  but  a  very  deficient  performance,  I  venture  to  set  forth  the 
line  upon  which  I  think  an  impartial  and  unprejudiced  inquirer 
would  approach  the  subject,  and  the  conclusions  to  which  he  would 
be  led. 

In  the  first  place,  I  think  that  such  an  inquirer  would  endeavor 
to  form  a  clear  conception  of  what  a  perfect  system  of  transporta- 
tion should  be,  and  to  note  where  and  how  our  present  system 
falls  short  of  that  ideal.  He  would  then  seek  the  reasons  of  these 
deficiencies,  and  taking  them  one  by  one,  would  inquire  whether 
or  not  railroad  consolidation  would  tend  to  increase  or  to  diminish 
their  sum.      It  is  this  line  of  inquiry  which  I  propose  to  pursue. 

It  is  unnecessary  to  dwell  upon  the  great  value  of  railroad  trans- 
portation to  the  community.  No  other  possible  investment  of  a 
man's  money  can  benefit  his  fellow  citizens,  near  and  remote,  to 
the  same  degree  that  capital  invested  in  a  railroad  does.  Such  in- 
vestments should,  therefore,  be  encouraged,  and,  if  for  no  other 
reason,  a  community  should  willingly  see  its  railroads  prove  profit- 
able and  secure  investments. 

But  more  especially  is  this  true  when  it  is  remembered  that  rail- 
road prosperity  begins  with  its  swifter,  safer  and  more  frequent 
trains,  better  cars  and  the  employment  of  more  men  and  disburse- 
ment of  larger  sums  as  wages,  interest  and  dividends.  It  is  a  bad 
thing  for  a  community  when  even  the  smallest  merchant  in  it  fails 
in  his  business,  and  many  of  his  neighbors  are  sure  to  feel  it  in  a 
greater  or  less  degree.  His  landlord,  his  doctor,  his  butcher,  his 
baker,  his  patrons,  his  creditors,  and  even  his  competitors  in  busi- 
ness, all  come  in  for  a  share  in  his  loss.  How  much  more  serious 
is  the  shrinkage  of  millions  of  dollars  of  invested  capital,  and  the 
gradual  depreciation  in  safe  and  efficient  service  of  a  great  railroad 

Reprinted  by  permission  from  the  Railway  Review  of  March  26,  1892. 


RAILROAD  CONSOLIDATION.  261 

upon  which  all  our  business  interests  and  so  much  of  our  social 
pleasures  depend? 

And  as  the  prosperity  of  large  communities,  of  whole  states 
even,  may  depend  upon  the  ability  of  the  railroads  serving-  them 
to  make  their  lines  highways  of  freight  and  travel  from  distant 
sections,  I  am  disposed  to  think  that  our  impartial  but  intelligent 
inquirer  may  even  put  as  the  first  requisite  of  an  ideal  railroad 
system  that  it  shall  be  prosperous  and  self-sustaining,  otherwise, 
whatever  other  excellences  may  be  provided,  the  result  might  be 
like  a  recipe  for  hare  soup  without  adequate  provision  for  hare. 

The  next  essential  condition  of  an  ideal  transportation  service 
is  that  its  rates  should  be  uniform.  By  uniform  I  mean  the  same 
to  all  persons  similarly  situated.  There  should  be  no  rebates  or 
secret  allowances  to  secure  the  business  of  large  shippers.  Mer- 
chants should  not  have  to  go  shopping  and  trading  for  rates,  but 
should  be  able  to  feel  confidently  that  all  competitors  stood  upon 
an  equal  footing  with  the  railroad  as  they  do  with  the  postofnce. 

Another  important  condition  of  an  ideal  service,  is  that  it  should 
be  as  far-reaching  as  possible,  and  require  dealing  with  the  fewest 
officials  to  get  rates  to  distant  points,  to  trace  for  delays  or  dam- 
age, and  to  collect  claims.  Other  things  being  equal  that  service 
is  the  best  which  reaches  the  farthest. 

Last,  but  not  least,  I  place  the  condition  that  rates  should  be 
reasonable.  They  should  be  high  enough,  but  no  higher,  than  to 
allow  fair  wages  to  employes,  fair  interest  on  the  capital  invested, 
and  full  maintenance  of  the  road  and  equipment  in  the  highest 
state  of  efficiency,  safety  and  progress. 

In  this  connection  it  should  be  noted  that  there  are  peculiar  dif- 
ficulties in  the  way  of  determining  equitable  railroad  rates  upon 
any  particular  article  which  are  not  generally  understood.  If  it 
were  possible  to  find  out  exactly  each  specific  act  of  transportation 
costs  it  would  be  easy  to  fix  a  price  which  would  refund  the  cost 
and  a  reasonable  profit.  Were  that  only  possible  there  would  be 
no  railroad  problems  and  no  anti-railroad  prejudice.  But  it  is  as 
utterly  impossible  to  determine,  for  instance,  what  it  costs  a  rail- 
road to  carry  a  barrel  of  flour  a  hundred  miles,  as  to  determine 
what  it  costs  a  doctor  to  prescribe  for  a  headache,  or  a  lawyer  to 
give  an  opinion.  In  either  case  the  actual  outlay  involved  is  prac- 
tically nothing,  but  the  ability  to  perform  the  act  represents  the 
entire  capital  of  the  railroad,  or  of  the  doctor,  or  of  the  lawyer. 
Hence,  all  three  must  graduate  their  charges  for  particular  ser- 
vices by  some  other  scale  than  by  the  actual  cost  of  each  service. 

The  only  other  equitable  scale  which  has  ever  been  devised,  the 
world  over,  has  been  to  proportion  the  charges  to  the  value  of  the 
service  rendered.  A  familiar  illustration  is  found  in  the  rates 
charged  for  postal  service.  The  postoffice  department  pays  the 
railroads  for  transportation  by  the  pound,  estimating  all  matter 
alike ;  but  it  charges  the  public,  rates  varying  from  one  cent  a 


262  RAILROAD  CONSOLIDATION. 

pound  to  thirty-two  cents  a  pound,  depending  upon  the  character 
of  the  matter  transmitted.  So  railroads,  the  world  over,  have 
been  compelled  to  classify  all  the  products  of  the  earth  and  of  all 
manufactures  and  industries  upon  earth,  and  assign  to  each  the 
proportion  which  it  shall  bear  of  railroad  maintenance  when  it  is 
transported  by  rail. 

And  here  is  where  the  trouble  comes  in.  Every  solitary  one  of 
these  innumerable  products  (as  numerous  as  the  nouns  in  the 
English  language),  when  it  moves  by  rail  is  in  competition  both 
with  other  articles  which  may  be  used  in  its  place,  and  with  simi- 
lar articles  produced  elsewhere,  and  the  rate  charged  by  the  rail- 
road is  a  material  factor  in  the  profits  of  the  shipper.  Naturally, 
interested  parties  will  always  think  that  their  particular  interests 
are  made  to  bear  an  undue  share  of  the  expense  and  plausible  ar- 
guments in  justification  of  their  complaints  can  always  be  con- 
structed, by  selecting  some  article  of  a  lower  classification,  and 
showing  that  the  actual  service  rendered  by  the  railroad  was  the 
same  in  each  case.  That  is  held  to  prove  that  the  railroad  has 
"  discriminated  "  against  this  article.  Of  course  it  has  discrimi- 
nated. It  discriminates  whenever  it  makes  a  rate.  Like  the  pos- 
tal service,  it  is  obliged  to  discriminate,  or  it  would  have  but  a 
single  rate  for  all  articles,  and  the  business  of  the  country  could 
not  go  on. 

I  do  not  mean  for  a  moment  to  imply  that  the  classifications 
now  in  general  use  are  unimpeachable  in  the  fairness  of  their  dis- 
criminations. They  are  the  gradual  growth  of  experience  and  com- 
promise, and  changes  are  constantly  taking  place.  But  angels  from 
Heaven  could  not  make  a  classification  which  would  satisfy  every- 
body, and  it  would  be  almost  a  miracle  if  any  two  angels  would 
fully  agree  upon  any  one  complete  classification.  The  trouble  is, 
that  there  is  no  principle  of  equity  to  be  appealed  to  in  adjusting 
innumerable  shades  of  differences,  and  this  inherent  difficulty, 
not  generally  appreciated,  is  the  cause  of  much  honestly  meant, 
but  unmerited,  criticism  of  railroad  management.  It  has,  how- 
ever, no  direct  bearing  upon  the  immediate  subject  of  present  dis- 
cussion, and  what  I  have  said  about  it  is  rather  to  eliminate  it  than 
to  treat  of  it  fully.  For  whether  10,000  miles  of  railroad  are 
under  a  single  management,  or  under  20  different  ones;  whether 
under  government  control,  or  under  private  individuals ;  rates  will 
remain  as  they  now  are,  based  purely  on  discriminations,  and  as 
a  whole  they  must  be  high  enough  to  maintain  the  railroads  and 
pay  a  reasonable  interest  on  the  investment.  If  rates  fall  short  of 
that  standard  there  must  follow  depreciation  of  the  railroad's 
securities  until  their  market  value  adjusts  itself  to  the  insufficient 
earnings. 

From  the  foregoing  we  may  now  sum  up  the  conditions  most  to 
be  desired  in  the  transportation  service  of  the  country  as  follows : 
I  St.   The  railroads  should  be  self-sustaining.     2nd.   Their  service 


RAILROAD  CONSOLIDATION.  263 

should  be  far-reaching.     3rd.   Their  rates  should  be  uniform  to  all. 
4th.   Their  rates  should  be  reasonable. 

We  have  now  to  consider  whether  the  consolidation  of  our  rail- 
roads into  large  systems  will  be  promotive  of  these  ends  or  other- 
wise. As  to  the  first  two  conditions  the  argument  is  very  short. 
It  is  beyond  controversy  that  consolidation  makes  possible  great 
economies  in  operation ;  far  greater  than  is  generally  appreciated. 
But  the  result  shows  for  itself  in  the  low  rates  of  freight  at  which 
the  large  systems  of  this  country  are  successfully  operated.  It 
permits  what  is  practically  the  doing  away  with  middle  men,  and 
the  middle  men  are  usually  very  expensive  men  in  every  kind  of 
business.  The  tendency  of  consolidation  is  therefore  distinctly 
towards  rendering  railroads  self-supporting. 

Next,  as  to  its  effect  in  rendering  far-reaching  service,  consoli- 
dation is  the  one  essential  and  indispensable  condition  of  such  ser- 
vice. No  road  can  fully  represent  its  connections,  or  be  held 
legally  responsible  for  them,  as  it  can  for  its  own  undertakings. 
Uniformity  of  rules,  classifications,  equipment,  continuity  of  sched- 
ules, and  innumerable  minor  refinements  of  safe  and  satisfactory 
service,  follow  and  attend  upon  unity  of  management.  There  are 
fewer  officials  for  the  public  to  deal  with,  and  these  officials  can 
fairly  be  held  to  a  larger  accountability,  and  have  more  power  to 
accomplish  the  constant  reforms  and  improvements  which  progress 
demands. 

Next,  we  have  to  inquire  into  the  tendency  of  consolidation  to 
bring  about  uniformity  or  equality  of  rates  to  all  shippers.  This 
means,  in  other  words,  nothing  but  the  abolishment  of  all  secret 
arrangements  by  which  concessions  and  rebates  from  the  publicly 
quoted  rates  are  given  to  favored  parties.  I  think  all  will  admit 
that  the  practice  of  giving  such  rebates  is  a  grievous  wrong — 
even  the  favored  shippers  who  receive  and  enjoy  them,  and  the 
ingenious  officials  who  devise  plans  to  pay  them  without  detection. 
For  the  law  already  condemns  them,  and  provides  fine  and  im- 
prisonment for  both  giver  and  receiver.  But  though  the  com- 
petitive business  of  the  country  is  known  to  be  full  of  them,  and 
strenuous  efforts  have  been  made  to  make  some  examples  of  vio- 
lators, I  have  never  heard  of  a  conviction  and  scarcely  of  a  single 
prosecution.  The  offense  is  of  a  character  too  easy  to  conceal, 
and  though  it  is  really  a  robbery  of  the  public  and  demoralizing 
to  employes,  it  will  never  be  eradicated  while  a  strong  temptation 
to  commit  it  exists. 

Now,  of  all  the  merits  of  consolidation,  the  chiefest  one  is  this, 
that  it  tends  to  lessen  and  remove  the  temptation  to  secret  re- 
bating. Its  effect  in  this  direction  is  too  obvious  to  require  any 
argument.  It  insures  a  larger  and  more  stable  business  inde- 
pendent of  all  risks  and  vicissitudes,  permits  a  more  economical 
transaction  of  it,  and  briefly  diminishes  the  temptation  to  secure 
traffic  by  secret  methods.     No  community  would  desire  to  see 


264  RAILROAD  CONSOLIDATION. 

persons  intrusted  with  important  public  functions  brought  to  star- 
vation, for  pressing  need  often  proves  too  great  a  temptation  to 
private  virtue.  vSo  it  should  not  desire  to  see  its  transportation 
service  in  the  hands  of  corporations  upon  the  perpetual  verge  of 
bankruptcy,  if  it  wishes  to  have  a  service  uniform  to  all,  and  free 
from  secret  rebates. 

There  remains  now  to  discuss  but  the  fourth  condition,  that 
rates  should  be  reasonable.  The  popular  fear  is  that  combination 
will  result  in  extortion.  But  there  are  abundant  facts  to  allay  that 
fear  which  even  the  "way-faring  man"  may  readily  discern.  In 
the  first  place,  "consolidation,"  in  the  full  sense  of  the  word,  can- 
not exist.  It  would  imply  a  bringing  under  one  management  of 
the  entire  system  of  roads  of  the  country,  while  the  only  consoli- 
dation possible  at  present,  and  what  is  now  being  discussed,  is 
only  a  very  partial  consolidation.  So  I  would  say,  in  the  first 
place,  that  there  is  no  possible  consolidation  which  will  not  neces- 
sarily leave  out  a  great  deal  more  than  it  takes  in,  and  that  the 
practical  question  is  not  as  to  what  will  be  the  results  of  an  abso- 
lute and  complete  consolidation,  but  what  is  the  tendency  of 
partial  consolidations  in  the  present  state  of  the  development  of 
our  country. 

Now,  as  to  their  tendency  to  result  in  extortionate  rates,  one 
very  obvious  fact  is,  that  so  far  as  it  has  yet  gone  in  this  coun-try, 
and  in  foreign  civilized  countries,  its  tendency  has  been  notoriously 
in  the  contrary  direction.  Ample  statistics  and  illustrations  could 
be  cited  did  time  and  space  permit;  but  Prof.  Hadley,  of  Yale, 
one  of  the  most  accurate  and  eminent  students  of  all  railroad  prob- 
lems, and  of  its  phases  in  all  countries  has  summed  up  the  facts 
in  a  single  sentence,  "consolidation  of  itself  created  through 
routes  and  longdistance  traffic."  [Railroad Transportation,  p.  13.] 
As  long  distance  traffic  is  only  possible  under  the  lowest  rates, 
the  working  tendency  of  consolidation  has  evidently  not  been 
toward  extortion.  I  do  not  mean  to  say  that  it  has  ever,  or  any- 
where, removed  all  complaints  of  discriminations,  or  of  high  rates 
upon  some  articles  as  compared  with  others.  That  would  be  a 
good  deal  to  expect  of  the  millennium  itself.  But  I  do  not  be- 
lieve there  exists  an  instance  where  a  consolidation  of  railroads 
has  resulted  in  extravagant  profits,  which  is  the  only  true  test 
whether  rates  as  a  whole  are  exorbitant.  Certainly  the  average 
results  indicate  that  if  there  are  exceptions  to  the  rule  that  railroad 
investments  in  the  south  yield  exceedingly  poor  returns,  the  excep- 
tions are  few  and  due  to  some  peculiarly  favorable  circumstances. 
For  the  very  prosperous  year,  1890,  the  returns  of  the  17,077  miles 
of  railroad  in  the  South  Atlantic  states,  including  the  two  Vir- 
ginias, the  two  Carolinas,  Georgia  and  Florida,  paid  total  divi- 
dends to  stockholders  of  $3,360,000,  an  average  of  but  $195  per 
mile,  not  two  per  cent  upon  ten  thousand  dollars  per  mile  of  stock. 
In  1886,  in  the  same  states,  only  nineteen  per  cent  of  the  mileage 


RAILROAD  CONSOLIDATION.  265 

paid  any  dividends  at  all  upon  stock,  and  only  seventy-eight  per 
cent  paid  interest  upon  their  bonds. 

But  their  remains  one  long  rooted  and  most  obstinate  objection 
to  railroad  consolidation,  which  must  be  considered  in  the  words 
in  which  it  is  usually  expressed,  although  its  only  real  meaning 
has  already  been  discussed.  It  is  said  that  railroad  consolidation 
will  "check  competition."  The  essential  meaning  of  that  phrase 
is  of  course  only  that  it  will  permit  extortion.  But  before  closing 
the  argument  upon  it,  it  is  well  to  consider  for  a  moment  the 
rather  sentimental  value  which  the  public  attaches  to  "competi- 
tion." From  the  days  in  which  there  were  many  governmental 
monopolies,  there  has  come  down  a  prejudice  against  "monopoly" 
and  a  friendship  for  "  competition  "  which  are  entirely  to  be  com- 
mended and  justified.  But  for  all  that,  centuries  ago  it  was  dis- 
covered that  there  might  possibly  be  too  much  even  of  a  good 
thing,  and  that  too  much  of  some  remedies,  even  of  competition, 
might  sometimes  constitute  another  disease.  From  this  convic- 
tion arose  gradually  innumerable  forms  of  what  was  called  ' '  Pro- 
tection," in  the  shape  of  tariffs,  unions,  brotherhoods,  alliances 
and  associations  of  every  trade,  profession  and  occupation  on  earth, 
until  practically  every  living  man  today  sees  in  his  own  business 
(which  is  the  only  one  he  understands  fully)  that,  after  competi- 
tion has  run  to  a  reasonable  extent,  there  must  be  some  form  of 
protection  devised  against  competition  gone  mad.  The  correct- 
ness of  this  general  belief  is  just  now  being  notoriously  empha- 
sized by  the  calamitous  effects  of  an  over  production  of  cotton. 

A  too  abundant  harvest  has  proven  a  national  calamity.  All 
other  interests  are  suffering  in  sympathy  with  the  cotton  planters, 
and  the  latter  are  attempting  to  devise  some  scheme  of  "protec- 
tion "  by  consolidation  and  co-operation.  Even  if  there  were  no 
other  arguments,  the  railroads  could  make  a  strong  appeal  upon 
analogy  and  equity  for  the  same  freedom  of  self -protection  allowed 
their  patrons,  their  employes  and  individuals  generally.  The 
railroad's  welfare  is  no  less  worthy  of  consideration,  for  it  is  sim- 
ply the  welfare  of  many  individuals  combined  to  carry  on  works 
too  large  for  the  means  of  a  single  one.  They  furnish  the  means 
by  which  the  weak  may  combine  and  compete  with  advantage 
against  the  strong,  and  no  one  who  desires  is  denied  the  enjoy- 
ment of  their  privileges. 

But  apart  from  all  this  argument  founded  upon  experience  and 
upon  reason,  as  to  the  danger  of  extortion  resulting  from  consoli- 
dation, there  remains  one  single  statement  of  fact  which  is  con- 
clusive of  the  whole  matter  even  without  any  argument  The 
simple  fact  is,  that  extortion  has  been  rendered  impossible  by  laws 
lodging  in  state  and  interstate  commissions  the  power  of  making 
all  railroad  rates.  While  these  commissions  exist  extortion  cannot 
exist,  for  it  is  provided  that  their  sympathies  and  leanings  shall 
not  be  toward  the  railroads. 


266  RAILROAD  CONSOLIDATION. 

Looking  back  now  to  the  four  conditions  of  an  ideal  railroad  ser- 
vice which  have  been  discussed  as  to  the  tendency  of  continued 
railroad  consolidation  to  bring  them  about,  it  has  appeared  that, 
as  to  the  first  three,  the  tendency  to  produce  self  sustaining:  roads, 
far  reaching  service,  and  rates  uniform  to  all  is  beyond  question. 
As  to  the  fourth  condition,  it  does  not  appear  that  railroad  con- 
solidation, as  far  as  it  has  yet  been  carried,  has  ever  resulted  in 
extortionate  rates  or  extravagant  profits ;  nor  is  it  likely  that  such 
result  could  attend  any  partial  consolidation  which  seems  either 
probable  or  possible.  But  even  were  that  the  case  there  is  always 
adequate  protection  for  the  public  against  extortion  in  the  powers 
of  state  and  interstate  commissions. 

It  is,  therefore,  to  the  interests  of  the  whole  commercial  and 
financial  world  that  railroads  should  be  assisted  and  encouraged 
to  abandon  the  cut-throat  policy  which  has  heretofore  prevailed 
among  them,  and  by  consolidation  and  co-operation  endeavor  to 
establish  their  securities  as  safe  investments  for  rich  and  poor, 
and  to  keep  pace  with  the  general  progress  and  improvement  of 
the  day  in  their  methods  and  service. 

It  may  be  done  quietly  and  gradually  and  without  loss  of  any  of 
the  many  millions  of  dollars  invested  in  the  securities  of  the  prop- 
erties involved,  but  even  with  a  constant  appreciation  of  them. 
But  if  not  accomplished  in  this  way  it  will  finally  come  through 
sales  at  auction  to  highest  bidders,  a  process  which  no  legislation 
can  check  but  which  will  take  away  from  present  owners  many 
millions  of  dollars  of  values. 


GOVERNMENT  INTEREERENCE  IN  ENGLISH 
RAILWAY  A\ANAGEA\ENT. 

By  W.  M.  Ac  worth. 

"Of  the  many  ways  in  which  common-sense  inferences  about  social  affairs 
are  flatly  contradicted  by  events,  one  of  the  most  curious  is  the  way  in  which, 
the  more  things  improve,  the  louder  become  the  exclamations  about  their 
badness.  ...  In  proportion  as  the  evil  decreases  the  denunciation  of  it 
increases ;  and  as  fast  as  natural  causes  are  shown  to  be  powerful  there  grows 
up  the  belief  that  they  are  powerless." 

— Mr.  Herbert  Spencer,  in  ,"A  Plea  for  Liberty." 

"The  key  to  the  solution  of  the  railway  problem  lies  in  the  thorough  appli- 
cation of  the  principle  of  publicity  to  railway  affairs.  .  .  .  The  railway 
problem  cannot  be  solved  except  in  reliance  on  the  principle  of  publicity. 
.  .  .  There  is  danger  lest  the  quietness  with  which  the  principle  of  publicity 
works  should  deprive  it  of  the  confidence  it  deserves." 

— Prof.  Henry  C.  Adams,  of  the  Michigan  University  and  the  Interstate  Com- 
merce Commission. 

In  these  two  quotations  from  distinguished  authorities,  the  one 
English,  the  other  American,  the  one  dealing  with  affairs  in  gen- 
eral, the  other  referring  to  transportation  questions  in  particular, 
there  is  to  be  found,  I  believe,  the  wisest  guidance  in  the  solu- 
tion of  the  railway  problem.  The  accuracy  of  this  belief  might 
be  established  by  an  appeal  to  the  general  history  of  all  ages  and 
all  countries.  For  such  a  task,  however,  not  columns  but  volumes 
would  be  required.  I  propose,  therefore,  to  confine  myself  en- 
tirely to  recent  English  railway  history,  being  confident  that  even 
this  limited  field  will  supply  illustrations  and  examples  sufficient 
for  our  present  purpose.  Public  attention  in  England  has,  in  the 
last  few  years,  been  attracted  by  the  following  railway  questions : 
freight  rates,  liability  of  the  companies  for  accidents  to  their 
servants,  hours  of  labor,  public  safety,  cheap  trains  for  the  work- 
ing classes,  and  punctuality. 

The  history  of  freight  rates  is  in  outline  as  follows :  The  special 
act  of  parliament  incorporating  a  railway  company — its  charter  as 
you  would  call  it — has  always  fixed  the  maximum  which  might 
legally  be  charged.  Further,  as  long  ago  as  1845  and  1854,  the 
general  law  laid  it  down — in  language  that  is  reproduced  almost 

Reprinted  by  permission  from  The  Independent  of  June  i,  1893. 


2  68     GOVERNMENT  INTERFERENCE— ENGLISH  RAILWAYS. 

verbatim  by  your  act  to  regulate  commerce — that  rates  must  be 
reasonable,  not  giving  to  one  customer  undue  preference  or  advan- 
tage over  others,  and  that  adequate  facilities  must  be  afforded  for 
the  interchange  of  traffic  without  delay,  preference  or  obstruction ; 
later  acts  have  imposed  on  the  companies  the  further  obligations 
to  publish  their  rates,  and  not  to  increase  them  without  fourteen 
days'  notice.  Here  then  was  a  complete  scheme  of  rate  regula- 
tion, comprising  first  a  fixed  maximum,  which  the  company  took 
with  its  eyes  open  as  condition  precedent  to  leave  to  build  its 
line ;  secondly,  the  obligation  to  hold  the  balance  even  between 
rival  localities  and  trades,  and  lastly,  publicity  of  rates  in  order 
that  every  one  might  be  in  a  position  to  know  if  his  legal  rights 
were  trenched  upon.  Of  course,  the  machinery,  being  liuman  in 
its  origin  and  depending  on  human  agency  for  its  working,  was 
very  far  from  perfect.  For  one  thing  the  maxima,  fixed  in  the 
early  days  of  railroading,  were  for  the  most  part  so  high  as  to  af- 
ford no  practical  check  on  the  powers  of  the  companies ;  for  an- 
other, an  appeal  to  the  law  courts,  or  to  the  railway  commission, 
which,  since  1873,  has  for  most  purposes  of  railway  litigation  taken 
their  place,  was  both  costly  and  troublesome ;  further,  judgment 
sometimes  went  for  the  railway  company,  not  on  the  abstract 
merits  of  the  case,  but  merely  because  it  was  a  more  practiced  and 
better-armed  combatant  than  almost  any  conceivable  trader  or 
group  of  traders. 

But,  on  the  whole,  the  results  were  by  no  neans  unsatisfactory. 
Rates  were  very  rarely  advanced,  and  by  no  means  rarely  reduced ; 
on  the  whole  the  average  tended  steadily  and  not  very  slowly 
downward ;  while,  on  the  other  hand,  the  accommodation  and  ser- 
vice given  in  return  for  the  rate  tended  steadily  and  by  no  means 
slowly  upward.  Rate  wars,  with  their  wild  fluctuations,  reducing 
all  business  for  the  time  to  little  better  than  gambling,  were  un- 
known; the  personal  and  secret  discriminations  which  have  dis- 
credited American  railway  management  were  unknown  also.  At 
the  very  time  when  America  was  ringing  with  the  disclosures  of 
the  Hepburn  committee,  a  committee  of  our  House  of  Commons 
reported  as  the  result  of  a  searching  investigation  that,  "on  the 
whole  of  the  evidence  they  acquit  the  railway  companies  of  any 
grave  dereliction  of  their  duty  to  the  public.  It  is  remarkable 
that  no  witnesses  have  appeared  to  complain  of  preferences  given 
to  individuals  by  railway  companies  as  acts  of  private  favor  or 
partiality."  It  was  true  that  the  English  public  had  not  the 
same  legal  power  to  control  rates  as  is  possessed  by  the  state  in 
most  continental  countries ;  but,  on  the  other  hand,  rates  could 
be  varied  to  suit  the  varying  exigencies  of  trade,  while  in  France 
and  Germany  the  necessary  formalities  occupy  so  much  time  that 
the  reasons  for  a  change  have  often  arisen  and  disappeared  again 
before  the  variation  has  received  official  sanction. 

Such  was  the  English  system ;  such,  alas !  it  is  likely  to  remain 


GOVERNMENT  INTERFERENCE— ENGLISH  RAILWAYS.     269 

no  longer.  But  it  is  safe  to  say  that  those  whose  hands  have  de- 
stroyed it,  did  not  know  what  they  were  really  doing.  The  change 
came  about  in  this  way.  In  the  course  of  fifty  years  many  hun- 
dreds of  separate  lines  had  been  chartered,  each  one  with  its  own 
independent  classification  and  schedule  of  maximum  rates.  The 
mass  of  different  acts  was  so  large,  so  confused,  and  sometimes  so 
contradictory,  that  it  was  almost  impossible  to  know  what  the 
powers  of  a  company  in  a  given  case  actually  were.  It  was  agreed 
on  all  hands  that  a  codification  of  the  powers  of  the  different  com- 
panies would  be  of  public  advantage.  The  companies  were  invi- 
ted to  undertake  the  work,  and  submitted  draft  codifications  to 
Parliament  as  long  ago  as  1885.  Naturally,  where,  for  the  sake 
of  uniformity,  it  was  necessary  either  to  level  up  maxima  or  to 
level  down,  the  companies  preferred  the  former  alternative. 
Equally  naturally,  their  customers  preferred  the  latter ;  and  the 
companies'  drafts  disappeared  in  a  storm  of  disapproval.  Then 
the  government  took  the  matter  in  hand,  and  finally  carried  through 
Parliament  in  1891  and  1892  a  series  of  revisions  which  came  into 
operation  at  the  beginning  of  1893. 

Unfortunately,  in  the  course  of  the  intervening  seven  years  the 
process  had  changed  its  character.  It  began  by  being  a  codifica- 
tion, it  ended  by  becoming  a  reduction  of  maximum  powers.  It 
was  originally  intended  to  enable  traders  to  know  what  charges 
the  companies  might  legally  make  and  for  what  service^ ;  it  was 
turned  aside  into  a  means  of  enabling  traders  to  economize  in  their 
expenses  for  transportation.  Maxima  were  fixed  by  wholesale  at 
points  not  only  below  the  maxima  on  the  faith  of  which  the  com- 
pany expended  its  capital,  but  below  the  rates  that  were  being  at 
that  moment  actually  charged.  The  reduction  of  revenue  thereby 
caused  to  the  companies  might  not  seem  very  large,  being  esti- 
mated at  some  ^300,000  on  a  gross  income  of  ^80,000,000.  Put 
another  way,  however,  and  reckoned  as  falling  wholly,  as  of  course 
it  must  do,  on  the  sum  available  for  the  ordinary  shareholders,  it 
meant  an  appreciable  reduction  of  dividend.  In  any  case,  the 
sum  was  larger  than  the  companies  were  prepared  to  surrender 
without  a  struggle.  So,  side  by  side  with  a  series  of  rates  com- 
pulsorily  reduced,  the  first  of  January  saw  a  second  series  of  rates 
advanced  by  the  companies  at  points  where  their  statutory  maxima 
had  left  them  a  margin  for  increase. 

When  the  traders  found  that  the  results  were  not  what  they  had 
expected  they  recommended  an  angry  agitation  all  over  the  coun- 
try. They  began  by  declaring  that  the  companies  had  been 
guilty  of  deliberate  deception.  This  charge  was  easily  enough 
disproved ;  but,  far  from  consenting  to  learn  by  experience  the 
disadvantages  of  State  regulation,  the  traders  are  now  going  on  to 
demand  that  the  English  government  shall  assume  a  control  over 
railway  rates  more  stringent  than  that  ever  exercised  in  Iowa  or 
Wisconsin  in  the  palmy  days  of  the  Granger  legislation.     A  new 


2  70    GOVERNMENT  INTERFERENCE— ENGLISH  RAILWAYS. 

House  of  Commons'  Committee  is  to  meet  and  consider  the  ques- 
tion immediately.  One  proposal,  which  seems  to  meet  with  a 
certain  amount  of  support,  is  that  companies  shall  be  at  liberty  to 
reduce  rates  at  pleasure,  but  shall  need  the  sanction  of  the  Board 
of  Trade  before  putting  in  force  an  increase.  Another  sugges- 
tion is  that  a  new  tribunal  shall  be  appointed  with  power  to  fix 
reasonable  rates  in  any  individual  case,  on  application.  Such  a 
tribunal  is  to  be,  we  are  told,  "  cheap  and  expeditious."  How 
this  desirable  result  is  to  be  attained  we  are  unfortunately  not 
precisely  informed.  But  that  Parliament  will  move  in  the  direc- 
tion of  further  administrative  interference  is,  I  think,  tolerably 
certain.  Competent  observers  are,  I  also  think,  tolerably  unan- 
imous in  believing  that  the  further  Parliament  moves  in  this 
direction,  the  more  serious  will  become  the  friction  between  the 
railways  and  their  customers.  This  much  at  least  is  matter  of 
history  that,  while  denunciations  of  the  arbitrary  and  extortionate 
conduct  of  the  railway  companies  were  increasing,  the  number  of 
instances  of  such  conduct  was  rapidly  being  diminished  through 
the  quiet  but  persistent  action  of  publicity  and  public  opinion, 
backed  in  rare  instances  by  an  appeal  for  justice  to  the  courts  of 
law,  and  that  the  situation  has  only  become  acute  at  the  moment 
when  the  sharp  sword  of  government  interference  has  been  used 
to  cut  asunder  at  one  stroke  a  situation  which  might  perhaps  have 
taken  a  dozen  or  twenty  years  to  disentangle  itself.  But  it  is  time 
to  turn  to  a  different  subject. 

The  Employers'  Liability  Act  of  1880  for  the  first  time  made  a 
master  responsible  to  his  servant  for  injuries  caused  by  the  negli- 
gence either  of  the  master  himself  or  of  a  fellow-servant.  That 
the  Act  has  done  good  in  making  masters  more  careful  that  in- 
juries shall  not  occur  is  not  denied.  On  the  other  hand  it  has  not 
been  without  compensating  disadvantages.  It  has  encouraged  a 
good  deal  of  futile  litigation,  and  the  lawyers  must  have  made  out 
of  it  in  fees  a  good  deal  more  than  the  workmen  have  secured  as 
compensation.  In  the  railway  service,  however,  its  effect  has 
been  of  almost  unmixed  benefit.  For  the  passage  of  the  Act 
stimulated  most  of  the  great  companies  to  establish  accident 
funds,  which  the  men  could,  if  they  chose,  join.  Here  are  the 
details  of  the  method  in  which  such  a  fund  works  at  the  present 
moment  on  the  Brighton  Company's  line :  No  man  need  join  it 
unless  he  chooses,  but  out  of  19,000  servants  all  but  two  were  glad 
to  do  so  when  it  was  first  started.  If  a  man  joins  he  pays  in  a  sum 
of  6  or  9  or  1 2  cents  per  month  and  binds  himself  not  to  sue  his 
employer  under  the  powers  of  the  Act.  In  return  in  case  of  acci- 
dent he  is  entitled,  according  to  the  amount  of  his  subscription,  to 
10s.  or  15.^.  or  ^i  per  week  during  disablement,  while  his  repre- 
sentatives can  claim  ;^ioo  or  ^150  or  ^200,  as  the  case  may  be, 
if  the  accident  is  fatal.  Of  course  the  men's  contributions  fall  far 
short — they  amount,  I  believe,  to  less  than  half — of  the  sum  neces- 


GOVERNMENT  INTERFERENCE— ENGLISH  RAILWAYS.     271 

sary  to  keep  the  fund  solvent ;  but  the  company  makes  itself  re- 
sponsible for  the  balance.  It  will  be  noted,  too,  that  the  Insur- 
ance Fund  pays  compensation  in  all  cases  of  accident  however 
caused ;  while  an  action  can  only  be  brought  with  success  in  the 
rare  instance  (not  one  in  fifty  I  was  assured  by  the  manager  of 
the  Brighton  fund)  in  which  negligence  of  employer  or  fellow- 
servant  can  be  positively  proved. 

As  far  as  railway  companies  are  concerned — I  say  nothing  one 
way  or  other  about  other  trades  as  to  which  I  have  no  special  in- 
formation— this  compromise  has  worked  most  satisfactorily  for  the 
last  dozen  years.  But  contracting  out  of  the  Act  has  always  been 
unpopular  with  the  trade-union  leaders,  and  this  session  the  Gov- 
ernment has  introduced  a  bill  to  put  an  end  to  it.  So  far  the 
humble  requests  of  the  railway  servants  to  be  let  alone  have  met 
with  but  scant  attention.  Why  300,000  adult  males,  qualified  to 
take  part  in  the  government  of  the  country,  are  not  to  be  con- 
sidered qualified  to  decide  for  themselves  whether  they  prefer  the 
complete  protection  of  an  Accident  Fund  x>r  the  very,  incomplete 
protection  of  a  right  to  extract  money  by  a  lawsuit  out  of  the  rail- 
way company  in  certain  specific  and  comparatively  rare  instances, 
it  is  not  very  easy  for  one  who  is  not  a  politician  to  understand. 

A  question  similar  in  many  respects  to  the  last  is  that  of  rail- 
way servants'  hours  of  labor.  A  committee  of  the  House  of  Com- 
mons bearing  this  name  sat  and  took  evidence  at  great  length  dur- 
ing the  sessions  of  1891  and  1892,  and  a  bill  based  upon  their  re- 
port was  introduced  this  year  by  the  board  of  trade.  It  has  al- 
ready passed  through  the  House  of  Commons  and  been  read  a  sec- 
ond time  in  the  House  of  Lords,  and  within  the  next  few  days  it 
is  almost  certain  to  receive  the  royal  assent.  The  evidence  before 
the  committee  went  to  show,  what  indeed  everyone  with  any  prac- 
tical acquaintance  with  the  subject  knew  already,  that  matters 
have  vastly  improved  within  the  last  few  years ;  that,  while  on  the 
lines  of  a  few  small  and  poor  companies  hours  are  still  far  too  long, 
the  great  companies  have,  as  a  rule,  set  their  house  in  order  with- 
out waiting  for  the  action  of  Parliament.  Had  the  committee 
pushed  its  researches  a  little  further  back,  it  would,  I  believe, 
have  found  that  in  this  matter  the  worst  company  of  to-day  does 
better  than  the  best  company  of  thirty  years  ago. 

Indeed,  there  is  considerable  ground  for  believing  that  public 
opinion,  combined  with  the  pressure  of  the  trade-unions,  whose 
leaders  are  mostly  inspired  with  longings  for  an  ideal  eight  hours 
day,  has  driven  the  companies  further  than  is  desired  by  the 
mass  of  the  railway  servants  themselves,  only  about  ten  per  cent 
of  whom  are  trade-unionists.  Some  color  to  this  belief  is  given 
by  a  recent  report  of  the  inspecting  officer  of  the  board  of  trade 
in  reference  to  an  accident  at  Waldridge,  in  Northumberland  last 
January: 

"Taking  the  whole  period  for  which  I  obtained  returns"  [writes  Major  Mar- 
indin],  "namely  from  November  28th  to  February  4th,  which  is  the  busiest 


272     GOVERNMENT  INTERFERENCE— ENGLISH  RAILWAYS. 

time  of  year,  the  average  daily  hours  of  duty  were  14  hours  and  41  minutes, 
and  the  average  daily  hours  worked,  deducting  all  stoppages,  were  9  hours  5 
minutes.  .  .  .  It  is  clear  that  the  hours  of  work  on  these  inclines  during 
the  busy  season  are  exceedingly  long,  but  the  evidence  on  this  head  is  remark- 
able. It  seems  that  the  company  made  offers  to  the  men  to  reduce  the  hours 
by  establishing  two  shifts ;  but  the  men  were  unanimous  in  asking  that  no 
change  should  be  made,  the  company  having  acceded  to  their  request  that  the 
regular  working  day  should  be  11  instead  of  12  hours  as  heretofore.  The  men 
expressed  themselves  as  being  thoroughly  contented  with  their  lot,  and  it  was 
most  satisfactory  to  hear  the  terms  m  which  they  spoke  of  their  employers. 
Under  these  circumstances,  it  would,  in  my  opinion,  be  very  undesirable  to 
take  any  further  action  which  might  possibly  have  the  effect  of  disturbing  the 
harmony  which  evidently  now  exists  upon  this  portion  of  the  Northeastern 
Railway." 

Parliament,  however,  is  prepared  to  run  this  risk,  tho'  it  is  only 
right  to  say  that  attempts  to  fix  a  statutory  working  day  for  rail- 
way servants  have  been  defeated  by  large  majorities.  The  new 
bill  provides  that  any  person  can  complain  to  the  Board  of  Trade 
that  overwork  is  taking  place  on  a  railway ;  that  the  Board  shall, 
thereupon,  inquire,  and  if  satisfied  that  there  is  2i  prima  facie  case, 
shall  call  uf)on  the  company  to  submit  a  schedule  of  the  working 
time  of  its  servants.  This  the  Board  may  either  approve  or  send 
back  for  amendment ;  it  may  further,  if  it  thinks  proper,  draw  up 
a  schedule  itself  and  require  the  company  to  adopt  it.  In  case  of 
non-compliance,  it  becomes  the  duty  of  the  Board  of  Trade  to 
prosecute  the  recalcitrant  company  before  the  Railway  Commis- 
sion, who  can  inflict  a  penalty  of  ;^  100  a  day  for  disobedience — so 
far  as  the  bill  relies  on  publicity  for  its  motive  power,  it  would 
seem  unobjectionable.  But  a  serious  difficulty  will  probably  be 
found  in  the  fact  that  the  Board  of  Trade  will  be  driven  by  the 
pressure  of  London  public  opinion  to  interfere  unnecessarily  with 
the  hours  of  labor  in  country  districts.  On  lines  in  London  eight 
hours  may  be  a  good  day's  work,  while  to  a  man  whose  trains 
come  only  six  times  in  the  day  even  sixteen  hours  of  nominal  ser- 
vice can  hardly  be  called  excessive.  And  yet  the  lay  public  are 
hardly  likely  to  appreciate  the  difference  at  its  real  value. 

Certainly  in  one  very  important  matter  the  Board  of  Trade 
itself  has  failed  to  appreciate  it.  One  of  the  most  useful  pieces  of 
railway  legislation  ever  placed  upon  the  statute  book  was  that 
which,  some  twenty  years  back,  provided  foi  official  investigation 
of  all  serious  accidents  The  inspecting  officers,  experts  of  ad- 
mitted capacity,  could  inquire,  could  report,  could  assign  the 
blame  and  propose  the  remedy.  There  the  powers  ended;  it  was 
left  to  public  opinion  and  the  good  sense  of  railway  managers  to 
do  the  rest.  And  they  did  it.  The  record  of  the  English  rail- 
ways for  safety  grew  better  and  better,  till  it  might  fairly  be  said 
that — considering  the  speed  and  the  diversity  of  traffic — it  was 
unequalled  in  the  world.  But,  unfortunately,  in  the  summer  of 
1889,  there  was  a  ghastly  accident  at  Armagh,  in  Ireland,  caused 
in  the  main  by  sheer  personal  stupidity.     Not  only  were  some 


GOVERNMENT  INTERFERENCE— ENGLISH  RAILWAYS.     273 

eighty  school  children  killed,  but  the  result  was  to  supply  steam 
which  enabled  the  legislative  machine  to  turn  out  a  new  act,  the 
Regulation  of  Railways  Act,  1889.  The  Board  of  Trade  obtained 
power  to  order,  where  previously  it  could  only  recommend,  and, 
having  got  the  power  proceeded  at  once  to  use  it.  Broadly  the 
Board  did  two  things ;  it  legislated  mixed  trains  of  freight  and 
passengers  out  of  existence,  and  it  laid  down  a  single  uniform 
standard  of  safety  appliances,  the  most  elaborate  and  expensive 
known,  as  necessary  to  be  used  throughout  the  length  and  breadth 
of  the  country.  If  American  readers  will  imagine  the  Atchison  or 
the  Denver  and  Rio  Grande  forbidden  to  carry  passengers,  except 
on  exclusively  passenger  trains,  and  required  to  fit  up  the  Hall  or 
the  Union  Switch  Company's  automatic  electric  block  over  their 
entire  system,  they  will  be  able  to  appreciate  the  situation  in 
which  Wales  and  Ireland  and  the  Highlands  of  Scotland  find 
themselves  at  this  moment.  The  public  is  grumbling  at  the  di- 
minished service,  while  the  railway  companies  are  at  their  wit's 
end  to  raise  capital  for  new  appliances  and  revenue  to  meet  the 
increased  working  expenses.  As  for  building  a  new  railway  in 
these  parts,  no  one  but  a  millionaire  philanthropist  is  likely  to 
think  of  it.  Doubtless,  the  Board  of  Trade,  with  its  eye  fixed  on 
London  and  the  crowded  traffic  of  the  great  main  lines,  believes 
that  it  is  acting  rightly.  The  feeble  voice  of  Caithness  and  Car- 
digan could  hardly  be  expected  to  carry  all  the  way  to  West- 
minster. 

Another  matter  in  which  Parliament  and  Government  depart- 
ments have  frequently  interfered  of  late  years  has  been  that  of 
workmen's  trains.  The  history  of  the  question  is  not  without  in- 
terest. About  thirty  years  back  several  railway  companies  con- 
structed new  lines  in  London  which  swept  away  hundreds  upon 
hundreds  of  houses  occupied  by  the  poorer  classes.  It  was  diffi- 
cult to  see  where  their  occupants  were  to  be  re-housed.  Parlia- 
ment, therefore,  laid  upon  each  company  an  obligation  to  run  a 
train  morning  and  evening  at  nominal  fares,  so  as  to  make  it  pos- 
sible for  the  displaced  workmen  to  seek  new  dwellings  down  the 
new  line.  Such  was  the  origin  of  workmen's  trains.  But  before 
long  companies  with  large  suburban  areas  still  unbuilt  on,  the 
Great  Eastern  more  particularly,  found  that  workmen's  trains 
were  not  without  advantages  even  as  a  business  speculation.  The 
fares  were  low,  but  on  the  other  hand  the  trains  were  full,  and  (in 
the  morning  at  least)  came  at  a  time  when  they  interfered  with  no 
other  traffic.  As  long  ago  as  1883  an  official  report  stated  that  the 
Great  Eastern,  being  bound  by  law  to  run  workmen's  trains  for  a 
total  distance  of  25  miles,  was  in  fact  running  23  trains,  with  a 
mileage  of  117X  miles.  In  1890  the  number  had  increased  to  49, 
and  the  distance  run  to  218J4!  miles. 

Meanwhile  public  opinion  on  the  question  has  changed  consid- 
erably.    Railway  companies  were  encouraged  and  exhorted    to 

18 


2  74    GOVERNMENT  INTERFERENCE— ENGLISH  RAILWAYS. 

provide  cheap  trains,  not  merely  for  workmen  whom  they  had  dis- 
placed but  for  all  persons  who  chose  to  avail  themselves  of  them. 
In  1883  an  Act  remitted  the  larger  part  of  the  passeng-er  tax  in 
the  case  of  all  companies  which  could  satisfy  the  Board  of  Trade 
that  they  were  making  adequate  provision  for  workmen's  accom- 
modation. So  far  so  good ;  but  recently  we  have  gone  beyond 
mere  encouragement  and  exhortation,  and  are  coming  to  compul- 
sion. The  Great  Eastern,  which  has  found  a  commercial  profit  in 
giving  exceptional  facilities,  is  now  regarded  not  merely  as  an  ex- 
ample worthy  of  imitation,  but  as  a  standard  to  be  compulsorily 
conformed  to  by  other  companies,  which,  from  the  fact  that  they 
do  not  encourage  workmen's  settlements,  presumably  fail  to  see 
any  commercial  advantage  to  themselves  in  so  doing.  Pressure 
is  being  applied  to  secure  a  reduction  of  the  fares  simultaneously 
with  an  extension  of  the  time  during  which  the  cheap  tickets  are 
available  from  7  to  8  a.  m.  Even  9  a.  m.  is  now  being  put  for- 
ward as  reasonable.  As  a  recent  instance  it  may  be  mentioned 
that  the  Central  London  Railway,  which  obtained  its  act  in  1891, 
is  under  an  obligation,  tho'  its  construction  will  not  touch  a  single 
workman's  house,  to  run  not  one  train  but  three  trains  the  whole 
length  of  the  line  (over  six  miles)  for  one  penny. 

The  result  of  this  legislative  interference  cannot  be  said  so  far 
to  be  very  satisfactory.  The  Central  London  Company  has  had 
now  for  nearly  two  years  the  right  to  take  possession  of  what  is 
naturally  the  most  valuable  rapid  transit  route  in  the  world.  But 
so  far  it  has  not  apparently  seen  its  way  to  raise  its  capital  and 
commence  operations.  Numerous  other  similar  undertakings  are 
likewise  at  a  standstill.  The  traffic  of  London  is  increasing  by 
leaps  and  bounds,  and  but  little  new  accommodation  is  being  pro- 
vided to  meet  it.  Before  long  we  are  likely  to  be  brought  face  to 
face  with  the  necessity  of  some  new  departure,  perhaps  in  the  di- 
rection of  national  or  municipal  subsidies  to  railway  extensions. 
Commercial  capital  has  been  scared  out  of  the  business,  not  so 
much  by  what  has  actually  happened  as  by  a  vague  distrust  of  the 
form  which  the  vicarious  philanthropy  of  the  legislature  may  ulti- 
mately assume.  If  the  final  result  is  to  increase  the  rates  and 
taxes  on  the  workingman's  house  in  order  to  subsidize  the  railway 
to  carry  him  to  and  from  his  work  for  an  unremunerative  fare,  it 
is  difficult  to  see  who  besides  the  officials  employed  to  control  the 
elaborate  financial  adjustments  will  have  gained  by  the  transac- 
tion. 

As  an  apt  contrast  to  these  various  instances  of  positive  legisla- 
tion, it  is  worth  while  mentioning  an  attempt  to  have  recourse  to 
simple  publicity  which,  so  far,  unfortunately,  has  missed  the  suc- 
cess which,  at  the  outset,  it  seemed  likely  to  attain.  I  refer  to 
the  matter  of  punctuality  of  train  service.  It  is,  I  think,  undeni- 
able that  on  the  whole,  reckoning  speed,  frequency  of  trains,  ac- 
commodation given,  and  fare  charged,  the  English  passenger  ser- 


GOVERNMENT  INTERFERENCE— ENGLISH  RAILWAYS.      275 

vice  is,  taking  the  country  through,  the  best  in  the  world.  Punc- 
tuality, however,  has  never  been  our  strong  point.  The  con- 
gested state  of  our  traffic  always  makes  it  difficult  of  attainment; 
dense  fogs  not  infrequently  make  it  impossible.  Moreover,  the 
ubiquity  of  competition  naturally  tempts  the  companies  to  promise 
a  little  more  on  paper  than  they  are  likely  actually  to  realize  in 
practice.  Still  there  is  no  reason  why  the  existing  state  of  things 
should  not  be  considerably  improved.  At  least  it  is  only  fair  that, 
where  two  companies  promise  to  carry  from  A  to  B  in  the  same 
time,  the  public  should  know  that  the  one  company  keeps  its 
promise,  say,  nine  times  out  of  ten,  and  the  other  perhaps  only  in 
one  journey  out  of  three. 

Actuated  by  this  idea  a  member  of  the  House  of  Commons,  in 
the  session  of  1889,  moved  for  and  obtained  a  return  of  the  punc- 
tuality of  trains  arriving  in  London  from  the  south ;  and  in  the 
year  1890  the  inquiry  was  extended  to  all  the  metropolitan  rail- 
ways. The  result  of  his  action  was  all  that  could  have  been  de- 
sired. Directors  and  managers  found  for  the  first  time  that  details 
of  train  working  were  not  beneath  their  notice ;  the  merits  or  de- 
merits of  the  different  companies  were  freely  canvassed  in  the 
newspapers ;  and  a  real  improvement  set  in  on  the  least  punctual 
railways.  Unfortunately  the  authorities  at  the  board  of  trades  had 
no  sympathy  with  this  line  of  action.  Gentlemen  accustomed  to 
wield  the  cudgel  of  an  act  of  Parliament,  to  give  orders  and  see 
them  obeyed,  had  naturally  no  belief  in  gentler  methods,  and 
looked  upon  the  humbler  office  of  purveyors  of  public  information 
as  beneath  their  dignity.  The  form  of  return  had  never  been  satis- 
factory. For  the  year  1891  it  was  made  positively  ridiculous. 
Moreover,  the  information  was  not  published  till  too  late  to  be  of 
any  interest.  The  return  for  the  year  1891  came  out  in  the  late 
autumn  of  1892.  Naturally,  the  newspapers  ignored  this  fragment 
of  ancient  history.  So  the  board  of  trade  declared  that  the  pub- 
lic took  no  interest  in  the  question,  and  discontinued  the  return. 
Better  instance  of  the  truth  of  Professor  Adams'  warning,  that 
"there  is  danger  lest  the  quietness  with  which  the  principle  of 
publicity  works  should  deprive  it  of  the  confidence  it  deserves," 
Professor  Adams  himself  could  hardly  desire. 

There  is,  however,  no  hope  that  the  public  will  see  the  question 
from  this  point  of  view  at  the  present  moment.  Two  years  back 
I  wrote  as  follows  (I  must  apologize  for  quoting  myself ,  but  I  can- 
not better,  and  have  no  wish  to  alter,  what  I  then  said) : 

"Popular  feeling  is  running  strongly  in  the  direction  of  substituting  for  the 
old  English  system  of  legal  redress  for  proved  injuries,  of  government  inspec- 
tion and  publicity,  a  new  system  of  direct  state  regulation,  of  constant  and 
minute  interference  by  a  government  department.  The  attempt  to  substitute 
the  one  system  for  the  other,  not  as  part  of  a  well  thought  out  and  deliberately 
adopted  course  of  policy,  but  by  a  series  of  haphazard  and  piecemeal  decisions, 
can  only  lead  to  failure  and  disappointment," 

That  since  this  was  written  government  interference  with  freight 


276     GOVERNMENT  INTERFERENCE— ENGLISH  RAILWAYS. 

rates  has  resulted  in  failure  and  disappointment,  is  a  matter  of 
history.  How  much  further  we  shall  advance  in  the  same  direc- 
tion, and  how  many  more  failures  and  disappointments  we  shall 
encounter  in  consequence,  remains  to  be  seen.  Whether  the  Eng- 
lish public  will  learn  by  experience  before  it  is  too  late,  or  whether, 
having-  harassed  private  enterprise  out  of  existence,  they  will 
awake  one  morning  face  to  face  with  the  necessity  of  taking  over 
and  working  the  railway  system  of  the  country  themselves,  the 
future  alone  can  show. 
London,  England. 


RAILWAY  ASSOCIATIONS. 

By  Mr.  Aldace  F.  Walker. 

An  important  difference  between  the  railway  service  of  the 
United  States  and  that  of  other  countries  is  found  in  the  fact  that 
traffic  by  rail  is  here  conducted  by  a  great  number  of  distinct  cor- 
porations. These  independent  organizations  are  found  in  all  the 
states  and  territories  of  the  Union,  maintaining  lines  of  roads  inter- 
laced and  interwoven  through  almost  innumerable  junction  and 
crossing  points,  and  actively  competing  with  each  other  for  the 
freight  and  passenger  business  of  every  section  of  the  country. 
There  are  now  in  the  United  States  over  150,000  miles  of  railroad 
owned  by  nearly  fifteen  hundred  companies ;  this  aggregate  mile- 
age is  now  operated  by  about  six  hundred  and  twenty-five  separate 
corporations.  The  process  of  combination  and  amalgamation  is  a 
marked  feature  of  the  railway  situation,  but  as  yet  it  has  proceeded 
only  to  the  extent  above  indicated.  At  the  present  time  there  is 
practically  no  part  of  the  country  in  which  active  competition  does 
not  exist  between  organically  independent  carriers.  Even  of  so- 
called  local  points,  situated  upon  the  line  of  a  single  road,  there 
are  very  few  where  traffic  is  not  in  some  respects  subject  to  com- 
petitive conditions,  or  where  the  transportation  charges  can  be 
arbitrarily  established  by  the  carrier.  Nor  is  railway  competition 
confined  to  the  various  routes  which  may  exist  to  and  from  the 
nearest  market;  but  all  markets  are  thrown  open  throughout  the 
land ;  rates  in  a  given  direction  are  often  regulated  by  those  which 
exist  in.  a  precisely  opposite  direction ;  the  price  of  each  commod- 
ity added  to  the  transportation  charge  determines  the  direction 
of  the  shipment  or  the  source  of  supply.  Moreover,  the  various 
water  routes  with  which  our  country  is  favored  have  an  almost  in- 
calculable influence  upon  the  railway  rates,  the  expense  being  very 
small  when  compared  with  the  expense  of  constructing,  maintain- 
ing and  operating  railway  routes. 

The  contrast  thus  presented  with  the  railway  system  of  France, 
for  example,  where  six  great  railway  companies  have  a  vast  sub- 
division of  the  national  domain  assigned  to  each  exclusively,  is  too 
marked  to  require  comment.  And  in  other  European  countries 
the  competitive  conditions  which  are  found  in  the  United  States 

Reprinted  by  permission  from  the  Railway  Review  of  January  4, 1890. 


278  RAILWAY  ASSOCIATIONS. 

have  been  to  a  great  extent  eliminated  through  state  ownership, 
by  protective  legislation,  or  by  amalgamation  of  titles. 

In  our  peculiar  form  of  dual  government,  each  state  authorizes 
the  construction  of  railroads  within  its  boundary  without  control 
or  supervision  by  the  nation.  Practically,  no  restrictions  have 
been  placed  upon  local  railway  building;  and  consolidations  of 
ownership  or  of  operative  control  are  easily  accomplished  by  the 
consent  of  state  legislatures,  coupled  with  concurrent  action  be- 
tween adjoining  states. 

Answering  the  demands  of  the  public  for  the  freest  possible 
interchange  of  products  and  commodities,  an  almost  universal  sys- 
tem of  through  traffic  has  come  into  existence ;  affording  facilities 
which,  while  altogether  unprecedented,  no  longer  excite  surprise. 
Each  company  might  have  contented  itself  with  receiving  passen- 
gers or  freight,  and  delivering  them  at  the  end  of  its  line  to  its 
connections ;  but  this  is  by  no  means  the  case.  On  the  contrary, 
the  various  companies  have  become  accustomed  to  act  together  in 
establishing  through  rates  of  fare  and  through  freight  tariffs  be- 
tween most  distant  points,  without  regard  to  the  hostile  relations 
which  necessarily  exist  among  them  in  respect  to  competitive 
traffic.  Tickets  can  be  universally  purchased  for  remote  destina- 
tions; freight  is  everywhere  consigned  to  every  other  point. 
Customs  have  arisen  in  the  provisions  for  through  business  and  in 
the  adjustment  of  traffic  balances  which  have  the  force  of  law.  The 
shipper  does  not  pause  to  inquire  concerning  the  route  over  which 
his  goods  are  to  be  forwarded ;  he  is  informed  of  the  established 
through  rate,  and  he  relies  without  anxiety  upon  the  arrangements 
which  the  companies  have  established  among  themselves,  concern- 
ing which  he  has  little  knowledge  and  less  care. 

The  work  of  railway  auditors  and  accountants  has  become  enor- 
mous, involving  the  exact  apportionment  not  only  of  each  com- 
pany's share  in  all  receipts  from  through  traffic,  but  also  of  losses 
and  of  liabilities  for  damages,  as  well  as  the  distribution  of  car 
service  charges  and  through  line  expenses.  One  of  the  great  wants 
of  the  present  time  is  a  railway  clearing  house,  or  a  series  of  clear- 
ing houses  embracing  territorial  groups  of  roads,  for  the  purpose 
of  auditing  their  innumerable  transactions  upon  a  common  basis, 
checking  all  charges  with  the  established  tariffs,  and  adjusting 
settlements  between  the  various  lines  each  with  each  other.  It  may 
be  said  in  passing  that  such  a  railway  clearing  house  was  early 
organized  in  England,  and  was  placed  upon  a  legal  foundation  by 
act  of  parliament  in  the  year  1850.  Nearly  every  company  in  the 
United  Kingdom  now  participates  in  its  benefits.  Its  affairs  are 
controlled  by  a  committee,  on  which  each  line  is  represented ;  and 
its  awards  are  made  by  law  final  and  conclusive  before  the  courts. 
•  When  the  act  to  regulate  Commerce  became  effective  on  April 
I,  1887,  our  railway  system  presented  substantially  the  features 
outlined  above,  although  many  practical  advances  in  conducting 


RAILWAY  ASSOCIATIONS.  279 

the  details  of  universal  intercommunication  have  since  been 
adopted.  It  soon  became  manifest  that  every  carrier,  to  some  ex- 
tent at  least,  was  engaged  in  interstate  commerce ;  and  one  con- 
sequence of  this  attempt  at  the  national  regulation  of  railways  has 
been  the  perception  by  close  observers  that  such  regulation,  to  be 
successful,  must  be  exclusive;  in  other  words,  that  Federal  control 
and  state  control  conflict  at  innumerable  points,  so  that  their  co- 
existence before  many  years  will  be  found  practically  impossible. 

The  theory  under  which  the  Interstate  Commerce  law  was 
framed,  contemplated  the  maintenance  of  the  independent  exist- 
ence of  railway  corporations  as  then  constituted,  subject  to  such 
organic  changes  as  their  owners  might  from  time  to  time  accom- 
plish by  contract  among  themselves  in  subordination  tp  the  laws  of 
the  several  states  under  which  they  held  their  various  charters, 
and  all  working  together  under  a  uniform  national  control.  Al- 
though this  was  the  first  important  occasion  in  which  the  Congress 
had  undertaken  to  exercise  the  power  intrusted  to  it  by  the  Con- 
stitution, to  regulate  commerce  among  the  several  states,  never- 
theless the  act  was  in  most  respects  well  considered  and  did  not 
contemplate  the  creation  of  any  obstacles  or  embarassments  in  the 
way  of  the  free  interchange  of  traffic.  On  the  contrary,  the  main- 
tenance of  through  routes  and  of  through  tariffs  was  provided  for, 
and  it  was  expressly  made  unlawful  for  any  common  carrier  in 
any  manner  to  prevent  the  continuous  carriage  of  freights  from 
the  place  of  shipment  to  the  place  of  destination.  It  became  im- 
mediately obvious  that  many  duties  were  incumbent  upon  carriers, 
some  imposed  and  others  recognized  by  the  new  law,  which  could 
be  satisfactorily  performed  only  through  joint  action  among  the 
roads. 

There  were  in  existence  at  that  time  many  tariff  organizations, 
commonly  known  as  pools,  which,  in  addition  to  the  apportionment 
between  competing  lines  of  earnings  derived  from  competitive 
traffic,  performed  many  other  important  functions  in  making  nec- 
essary arrangements  of  all  kinds  under  which  traffic  might  be  sys- 
tematically conducted.  These  organizations  had  been  found  in- 
dispensible  for  the  proper  and  efficient  transaction  of  railroad  busi- 
ness ;  and  when  the  pooling  of  freights  was  abandoned  these  ex- 
isting organizations  each  became  the  nucleus  of  a  reorganized  as- 
sociation, exercising  a  certain  supervision  and  control  over  tariffs 
and  traffic  arrangements.  The  form  of  their  organization,  and 
their  purposes  are  not  clearly  understood  by  the  public :  in  fact, 
their  very  existence  has  given  rise  in  some  sections  to  jealousy; 
they  have  been  attacked  from  time  to  time  before  the  Interstate 
Commerce  Commission;  state  legislatures  have  attempted  their 
suppression ;  and  in  Texas  a  judicial  decision  of  the  highest  tri- 
bunal has  held  one  of  them  to  be  organized  in  a  form  incompatible 
with  the  provisions  of  the  constitution  of  the  state. 

At  the  present  time  the  leading  Railway  Associations  are  the 


2  8o  RAILWAY  ASSOCIATIONS. 

following:  The  Trunk  Line  Association,  embracing  the  great  rail- 
roads which  operate  between  the  Atlantic  seaboard  and  the  cities 
of  Buffalo,  Pittsburg  and  Wheeling ;  the  Central  Traffic  Associa- 
tion, which  includes  most  of  the  roads  in  the  territory  west  of  the 
Trunk  Lines  as  far  as  Chicago  and  St.  Louis ;  the  Interstate  Com- 
merce Railway  Association,  with  its  affiliated  organizations  called 
the  Western  Freight  Association,  the  Western  States  Passenger 
Association,  and  the  Trans-Missouri  Freight  and  Passenger  Asso- 
ciation, covering  the  region  between  Chicago  and  St.  Louis  on  the 
one  hand  and  the  Rocky  Mountains  on  the  other;  the  Southern 
Railway  and  Steamship  Association  and  the  Southern  Passenger 
Association,  having  their  field  in  the  southern  states  east  of  the 
Mississippi, river;  the  Southern  Interstate  Association,  working  in 
the  southwest  beyond  the  Mississippi ;  and  the  Trans-Continental 
Association,  embracing  traffic  to  and  from  the  Pacific  coast.  In 
addition  to  the  foregoing  there  are  a  number  of  other  associations, 
some  of  which  have  to  do  with  the  freight  or  passenger  traffic  of 
smaller  sections  of  the  country;  some  with  selected  articles  of 
traffic;  some  are  limited  to  particular  subjects  like  classification, 
and  the  exchange  of  cars. 

Their  organization  is  very  simple.  The  officer  in  charge  is 
usually  designated  as  commissioner,  or  chairman ;  and  he  is  gen- 
erally assisted  by  a  secretary,  an  accountant  or  auditor,  and  a 
small  staff  of  clerks  who  perform  such  services  as  are  necessary 
in  the  preparation  and  publication  of  tariffs  and  the  collection  and 
distribution  of  statistics.  They  are  purely  voluntary,  and  are 
formed  by  agreement  between  the  various  lines  which  compose 
them,  the  details  of  which  are  expressed  in  articles  of  association 
subscribed  by  representatives  of  the  several  roads.  These  agree- 
ments are  filed  with  the  Interstate  Commerce  Commission,  pur- 
suant to  the  requirement  of  the  act  to  regulate  commerce,  which 
provides  for  the  filing  of  copies  of  all  contracts,  agreements  or  ar- 
rangements between  common  carriers  in  relation  to  traffic  affected 
by  the  provisions  of  said  act.  Stated  meetings  are  held  from  time 
to  time,  usually  monthly,  which  are  attended  by  a  representative 
of  each  line,  and  which  are  usually  presided  over  by  the  chairman 
or  commissioner.  Unanimous  agreement  is  commonly  required 
in  order  to  effect  a  change  in  established  rates,  rules  or  regulations 
respecting  traffic,  subject,  however,  to  a  right  or  independent 
action  which  is  reserved  in  case  of  failure  to  agree.  In  the  event 
of  disagreement  between  the  lines  arbitration  is  sometimes  pro- 
vided for.  The  duties  of  the  chairman  frequently  embrace  the  in- 
vestigation of  cases  where  it  is  claimed  that  tariffs  have  not  been 
maintained,  or  that  the  established  rules  and  regulations  which 
govern  the  handling  of  traffic  have  been  departed  from ;  the  re- 
quirements of  the  association  in  such  cases  being  in  conformity 
with  the  provisions  of  the  act  to  regulate  commerce,  which  forbids 
the  charging  of  a  greater  or  less  compensation  for  the  transporta- 


RAILWAY  ASSOCIATIONS.  281 

tion  of  passengers  or  property  than  is  specified  in  the  schedule  of 
rates,  fares  and  charges  at  the  time  in  force,  and  which  requires 
ten  days'  public  notice  of  any  advance  in  rates,  together  with  three 
days'  public  notice  of  reductions. . 

The  basis  upon  which  these  associations  rest  is  simply  good  faith 
among  the  members.  They  are  not  corporations,  and  they  exer- 
cise no  corporate  powers ;  yet  they  deal  at  times  with  questions 
of  the  utmost  importance,  and  their  influence  is  distinctly  visible  in 
every  branch  of  the  railway  service.  The  subjects  which  they  treat 
are  not  restricted  to  the  territory  which  they  respectively  embrace, 
but  the  various  associations  are  able,  by  negotiation  with  each 
other,  to  accomplish  results  in  the  management  of  long  distance 
traffic  that  would  otherwise  be  altogether  impossible. 

In  order  to  correctly  apprehend  the  relation  which  they  bear  to 
the  governmental  regulation  of  carriers,  it  is  necessary  first  to 
understand  precisely  what  is  undertaken  by  the  federal  law  under 
which  all  interstate  commerce  is  now  carried  on.  When  this  is 
properly  appreciated  it  will  be  perceived  that  the  work  of  the  asso- 
ciations is  directly  in  line  with  the  administration  of  the  law ;  in 
fact,  that  they  owe  their  existence  at  the  present  time  to  the  effort 
and  desire  of  the  carriers  to  transact  their  business  in  conformity 
with  the  statute ;  and  that  as  a  practical  matter  the  act  to  regulate 
commerce  would  not  be  workable  without  the  intervention  of  rail- 
way associations. 

The  object  proposed  by  Congress,  in  enacting  the  Interstate 
Commerce  law,  may  be  perceived  by  ascertaining  the  then  exist- 
ing evils  which  that  legislation  proposed  to  remedy.  The  introduc- 
tion of  the  bill  was  preceded  by  a  long  investigation,  which  re 
suited  in  the  formulation  of  an  able  report  discussing  broadly  the 
general  subject  of  the  internal  commerce  of  the  country,  its  im- 
portance and  the  methods  employed  in  carrying  it  on ;  and  which 
embraced  a  concise  and  summary  statement  of  conclusions  entitled 
"The  Causes  of  Complaint  Against  the  Railroad  System."  The 
points  covered  by  this  indictment  were  eighteen  in  number,  and 
there  is  scarcely  one  of  them  which  is  not  comprehended  within 
the  significant  word  "  discrimination."  It  was  charged  that  local 
rates  were  unreasonably  high  as  compared  with  through  rates ; 
that  both  were  unreasonably  high  at  non-competing  points;  that 
unjustifiable  discriminations  were  constantly  made  between  indi- 
viduals ;  also  between  articles  of  freight  and  branches  of  business 
of  a  like  character;  also  between  localities;  also  by  the  use  of 
secret  special  rates,  rebates,  drawbacks  and  concessions ;  also  by 
secret  cutting  rates  and  fluctuations,  demoralizing  to  legitimate 
business ;  also  by  the  granting  of  free  passes ;  by  undue  advantages 
afforded  to  business  enterprises  in  which  railway  officials  were  in- 
terested ;  and  otherwise  as  was  set  forth  with  particularity  and 
detail. 

Examined  in  the  light  of  this  report  it  is  easy  to  perceive  that 


282  RAILWAY  ASSOCIATIONS. 

the  fundamental  purpose  of  the  Interstate  Commerce  law  is  the 
prevention  of  discrimination  in  every  form.  The  first  five  sections 
of  the  statute  declare  the  principles  that  are  to  regulate  the  inter- 
nal commerce  of  the  country,  and  the  subsequent  sections  provide 
machinery  for  the  enforcement  of  the  rules  thus  first  laid  down. 
These  rules  are  three  in  number:  First,  all  railroad  charges  shall 
be  reasonable  and  just;  second,  no  unjust  discrimination  between 
persons  by  means  of  special  rates,  rebates,  drawbacks,  or  other 
devices  shall  be  permitted ;  third,  no  undue  or  unreasonable  pref- 
erence or  advantage  shall  be  given  to  any  person,  locality  or  de- 
scription of  traffic,  in  the  establishment  of  tariffs. 

These  provisions  comprise  the  foundation  principles  of  the  In- 
terstate Commerce  law ;  the  famous  fourth  section  being  merely 
a  declaration  that  the  charge  of  a  greater  sum  for  a  shorter  than 
for  a  longer  distance,  shall  constitute  a  preference  or  discrimi- 
nation in  favor  of  the  more  distant  point,  unless  conditions  and 
circumstances  exist  which  make  the  service  dissimilar;  and  the 
fifth,  or  anti-pooling  section,  was  undoubtedly  the  result  of  a  belief 
on  the  part  of  its  authors  that  the  pooling  system,  by  stifling  com- 
petition, tended  to  make  rates  unreasonably  high. 

The  leading  feature  of  the  administrative  portion  of  the  law  is 
found  in  the  sixth  section,  which  requires  the  establishment  and 
publication  by  the  carriers  of  tariffs  showing  rates,  fares  and 
charges  for  all  interstate  carriage  of  passengers  and  property,  to- 
gether with  the  classification  of  freight  in  force,  and  any  rules  or 
regulations  which  affect  the  rates.  These  tariffs  are  required  to 
be  filed  with  the  Commission,  and  when  established  must  be  ab- 
solutely adhered  to.  The  charge  of  a  greater  or  less  sum  than  the 
established  rate  is  made  a  misdemeanor.  This  requirement  that 
tariffs  for  all  traffic  shall  be  fixed  in  advance,  made  public  and  rigid- 
ly observed,  is  obviously  designed  to  prevent  discrimination.  The 
task  imposed  upon  the  carriers  by  the  passage  of  the  law  was  aii 
enormous  one.  It  involved  nothing  less  than  the  establishment  of 
a  full  and  complete  system  of  schedules  of  rates,  fares  and  charges, 
not  only  between  the  stations  upon  each  road,  but  between  all 
points  in  the  United  States  under  which  through  traffic  might  be 
handled  by  joint  tariffs,  which  should  be  without  preference,  as 
between  localities,  and  as  between  classes  of  traffic ;  which  should 
be  just  and  reasonable  in  every  respect,  and  which  should  be  made 
the  measure  by  which  all  transportation  charges  should  be  gov- 
erned, disregarding  previous  customs  and  usages,  and  suddenly 
bringing  the  entire  interstate  traffic  of  the  country  within  the 
operation  of  a  procrustean  rule.  Sixty  days  were  allowed  for  this 
task  before  the  law  became  operative.  The  work  is  by  no  means 
finished  yet.  The  various  details  necessary  to  be  covered  in  the 
establishment  of  tariffs,  classifications,  rates,  rules  and  regulations 
controlling  transportation  of  persons  and  property  are  almost  in- 
numerable.    Tariffs  and  traffic  regulations  must  necessarily  be 


RAILWAY  ASSOCIATIONS.  283 

alike  upon  the  lines  of  carriers  engaged  in  joint  operations,  or 
holding  competitive  relations  with  each  other.  Harmonious  action 
between  carriers  was  an  absolute  necessity  in  order  to  enable 
them  to  take  the  first  step  in  obedience  to  the  administrative  sec- 
tions of  the  Interstate  Commerce  law.  This  cause  compelled  the 
continuance,  for  the  purpose  above  described,  of  such  associations 
as  had  previously  been  in  existence,  and  the  development  of  a 
system  for  the  conduct  of  traffic,  in  which  the  existing  associations 
play  an  important  part.  The  Interstate  Commerce  Commission, 
in  its  first  annual  report,  recognized  this  feature  of  the  situation 
in  carefully  chosen  words,  as  follows : 

"Voluntary  Association  of  Railroad  Managers. 

' '  Nearly  every  railroad  in  its  origin  has  been  independent  of  all  others,  and 
in  the  early  history  of  such  roads  they  were  commonly  provided  for  as  local 
conveniences,  with  no  provision  of  the  great  highways  of  trade  and  communica- 
tion which  they  have  since  become.  It  was  in  many  cases  thought  to  be  im- 
portant that  a  road  should  be  kept  as  distinct  in  its  business  from  all  others  as 
possible,  and  at  their  termini  in  some  instances  they  are  not  allowed  to  have 
the  same  freight  or  passenger  stations  with  other  roads,  lest  the  local  draymen 
and  hackmen  should  be  deprived  of  a  profitable  employment. 

' '  When  the  great  possibilities  of  railroad  service  came  to  be  better  under- 
stood these  primitive  notions  of  local  benefits  gave  way  before  a  more  enlight- 
ened public  sentiment,  and  the  fact  was  recognized  that  the  public  interest 
would  be  best  subserved  by  making  the  connection  between  the  roads  as  close 
as  possible,  in  order  that  the  commerce  between  different  sections  and  localities 
might  go  on  steadily  and  uninterruptedly.  The  railroad  companies  perceived 
also  that  their  interest  lay  in  the  same  direction.     *    *    * 

.' '  To  make  railroads  of  the  greatest  possible  service  to  the  country,  contract 
relations  would  be  essential,  because  there  would  need  to  be  joint  tariff's,  joint 
running  arrangements,  an  interchange  of  cars  and  a  giving  of  credit  to  a  large 
extent,  some  of  which  were  obviously  beyond  the  reach  of  compulsory  legisla- 
tion, and  even  if  they  were  not,  could  be  best  settled  and  all  the  incidents  and 
qualifications  fixed  by  the  voluntary  action  of  the  parties  in  control  of  the  roads 
respectively. 

"Agreement  upon  these  and  kindred  matters  became,  therefore,  a  settled 
policy ;  short,  independent  lines  of  road  seemed  to  lose  their  identity  and  to 
become  parts  of  great  trunk  lines,  and  associations  were  formed  which  em- 
braced all  the  managers  of  roads  in  a  state  or  section  of  the  country.  To  these 
associations  were  remitted  many  questions  of  common  interest,  including  such 
as  are  above  referred  to.  Classification  was  also  confided  to  such  associations, 
it  being  evident  that  differences  in  classification  were  serious  obstacles  to  a 
harmonious  and  satisfactory  interchange  of  traffic.  But  M^hat  perhaps  more 
than  anything  else  influenced  the  formation  of  such  associations  and  the  con- 
ferring upon  them  of  large  authority,  was  the  liability,  which  was  constantly 
imminent,  that  destructive  wars  of  rates  would  spring  up  between  competing 
roads  to  the  serious  injury  of  the  parties  and  the  general  disturbance  of  business. 

"Accordingly,  one  of  the  chief  functions  of  such  associations  has  been  the 
fixing  of  rates  and  the  devising  of  means  whereby  their  several  members  can 
be  cbmpelled  or  induced  to  observe  the  rates  when  fixed.  And  in  devising 
these  means  the  chief  difficulty  was  encountered.  Agreements  upon  rates 
were  voluntary  arrangements  which  could  be  departed  from  at  pleasure,  and 
if  they  had  behind  them  no  sanction,  they  were  not  likely  to  stand  in  the  way 
of  a  war  of  rates  when  the  provocation  to  one  seemed  sufficient.  Accordingly, 
the  scheme  of  pooling  freights  or  the  earnings  from  traffic  was  devised  and 
put  in  force  through  the  agency  of  these  associations,  as  a  means  whereby 
steadiness  in  rates  might  be  maintained.  The  scheme  was  one  which  was 
made  use  of  in  other  countries  and  had  been  found  of  service  to  the  roads. 


284  RAILWAY  ASSOCIATIONS. 

"The  pooling  system  was  looked  upon  with  distrust  by  the  public,  mainly 
because  it  seemed  to  be  a  scheme  whereby  competition  between  the  roads 
could  be  obviated  and  rates  for  railroad  service  put  up  or  kept  up  to  unreason- 
able figures.  But  if  railroad  managers  supposed  that  by  this  scheme  they  were 
to  stop  competition  among  themselves,  the  result  has  not  answered  their  ex- 
pectations. Competition  has  still  gone  on ;  each  road  striving  to  obtain  as 
large  a  share  of  the  business  as  possible,  and  no  agreement  among  them  could 
altogether  prevent  a  yielding  to  the  pressure  of  shippers  for  lower  rates.  *  *  * 

"  The  pooling  of  freights  and  of  railroad  earnings,  so  far  as  the  commission 
has  knowledge  or  information  on  the  subject,  came  to  an  end  when  the  act 
took  effect.  But  as  pooling  was  only  one  of  several  purposes  had  in  view  in 
forming  railroad  associations,  the  leading  associations  have  not  been  dissolved, 
but  have  been  continued  m  existence  for  other  objects.  Among  these  objects 
are  the  making  of  regulations  for  uninterrupted  and  harmonious  railroad  com- 
munication and  exchange  of  traffic  within  the  territory  embraced  by  their 
workings.  Some  regulations,  in  addition  to  those  made  by  the  law,  are  almost, 
if  not  altogether,  indispensable.  Thus,  while  the  seventh  section  of  the  act 
forbids  the  carriers  preventing  shipments  from  being  continuous  by  the  device 
of  changing  time  schedules,  carriage  in  different  cars,  etc.,  it  has  not  under- 
taken to  provide  for  the  making  of  such  time  schedules  as  would  facilitate  the 
continuous  shipment,  or  to  prescribe  rules  for  the  loading  and  movement  of 
cars  for  that  purpose.  However  desirable  this  might  have  been,  if  it  were 
practicable  to  make  rules  which,  while  general  in  their  nature,  should  be  suf- 
ficiently definite  of  enforcement  as  laws,  it  was  doubtless  perceived  by  Con- 
gress that  these  and  many  other  matters  of  detail,  though  they  might  be  of 
high  importance,  could  not  be  wisely  and  effectively  dealt  with  by  general 
legislation,  but  that  such  legislation  must  chiefly  be  restricted  to  provisions  for 
regulation  and  to  prevent  abuse. 

"Moreover,  these  matters  of  detail,  to  a  considerable  extent,  involve  the 
element  of  contract,  and  also  of  credit,  when  one  company  becomes  the  agent 
for  another  in  the  sale  of  tickets  and  the  collection  of  freight  moneys ;  and  they 
then  require  the  assenting  minds  of  parties,  and  the  number  of  parties  whose 
minds  are  to  be  brought  into  accord  being  commonly  very  considerable,  an 
association  of  officers  or  agents  is  made  the  means  of  bringing  about  the  de- 
sired unity  of  action,  and  is  also  made  a  common  arbiter,  to  prevent  frequent 
and  serious  disturbances. 

"Classification  also,  as  has  been  said,  is  not  by  the  act  taken  out  of  the  hands 
oi  the  carriers,  though  a  certain  power  of  supervision  is  vested  in  the  commis- 
sion ;  and  classification  is  not  only  best  made  by  joint  action,  but  if  it  were  not 
so  made  and  the  methods  of  the  roads  thereby  brought  into  harmony,  it  would 
probably  become  indispensable,  however  undesirable  it  might  otherwise  be, 
for  the  law  to  undertake  to  provide  for  it.  Moreover,  when  classification  is 
made  and  put  into  effect  it  becomes  necessary  to  make  provisions  for  inspect- 
ing or  some  sort  of  supervision  of  its  application,  in  order  to  prevent  its  being  em- 
ployed as  a  device  for  giving  preferences  as  between  shippers.  A  fraudulent 
classification,  through  connivance  of  the  agent  in  making  out  deceptive  ship- 
ping bills,  has  often  been  resorted  to  for  this  purpose ;  and  as  the  fraud  affects 
the  competing  carriers  as  well  as  the  shippers  who  are  discriminated  against 
by  means  of  the  cheat,  the  carriers  and  the  public  alike  are  interested  in  such 
a  supervision  of  the  work  of  all  the  roads  as  will  be  likely  to  detect  the  fraud. 
Self-interest  on  the  part  of  the  carriers  will  impel  to  this  supervision,  and  it  is 
most  generally  done  through  some  common  agency.  If  it  shall  be  fairly  done 
as  between  the  carriers  themselves,  it  will  tend  to  the  protection  of  the  public ; 
and  the  benefits  will  be  on  the  same  line  with  those  the  act  undertakes  to  es- 
tablish or  provide  for." 

JOINT    TRAFFIC. 

It  will  be  observed  that  the  traffic  which  lies  within  the  scope 
of  association  control  may  be  considered  under  two  distinct  rela- 


RAILWAY  ASSOCIATIONS. 


285 


tions,  as  joint  traffic  and  as  competitive  traffic.  Joint  traffic  is  de- 
fined in  the  act  to  regulate  commerce  as  "where  passengers  and 
freight  pass  over  continuous  lines  or  routes  operated  by  more  than 
one  common  carrier,  and  the  several  common  carriers  operating 
such  lines  or  routes  establish  joint  tariffs  of  rates  or  fares  or 
charges  for  such  continuous  lines  or  routes."  The  general  nature 
of  the  work  of  the  associations  in  respect  to  joint  traffic  has  been 
already  indicated.  Through  their  agency  arrangements  of  all  kinds 
are  consummated  under  which  joint  service  is  made  possible, 
and  constant  improvements  in  its  extent  and  facilities  are  brought 
about.  The  principle  subjects  of  negotiation  and  concerted  action 
are  the  following:  rates,  classification  of  freight,  apportionment 
of  earnings,  and  inspection.  Other  points  relating  to  through 
traffic,  such  as  time  table  arrangements,  exchange  of  cars  and 
settlement  of  traffic  balances  are  usually  adjusted  by  individual 
connecting  lines. 

Lines  where  traffic  originates  are  expected  to  establish  and  pub- 
lish through  rates  to  points  of  ultimate  destination,  but  such  rates 
must  necessarily  be  made  by  agreement  between  the  various  lines 
composing  such  through  routes,  and  the  necessary  agreements 
would  be  too  infinite  in  number  to  be  practically  possible  without 
the  assistance  of  associations.  The  present  extremely  complica- 
ted system  is  the  result  of  long  years  of  negotiation  and  contest. 
The  effect  of  rates  which  exist  in  one  section  of  the  country  upon 
those  made  between  very  distant  points,  can  be  appreciated  only 
by  careful  study.  Certain  principles  in  the  relation  of  rates  to 
each  other  and  in  the  use  of  established  differences,  sometimes 
called  differentials,  have  been  worked  out,  usually  by  some  arbi- 
tration or  agreement,  founded  upon  just  reasons  and  presenting  a 
medium  between  the  claims  of  competing  points.  These  adjust- 
ments are  found  in  every  section  of  the  country  and  are  made  upon 
the  broadest  principles.  While  one  community  and  another,  upon 
a  narrow  view  of  its  geographical  situation,  has  from  time  to  time 
made  complaint  of  an  alleged  unfair  adjustment  of  its  rates,  in- 
stances have  been  very  few  in  which  the  lines  have  been  unable 
to  demonstrate  that  the  tariffs,  in  fact,  were  just  and  reasonable, 
upon  the  requirements  of  the  whole  situation  involved.  Through 
rates  are  almost  invariably  somewhat  less  than  the  sum  of  the  local 
rates,  and  are  necessarily  established  by  concerted  action  in  view 
of  the  relation  of  rates  at  one  point  to  those  at  others.  The  mile- 
age rate  of  the  shortest  line  is  taken  as  the  maximum.  No  line, 
however  circuitous,  can  expect  to  participate  in  the  traffic  if  its 
rates  are  higher ;  and  cases  are  found  where  the  effort  is  made  to 
attract  travel  to  longer  routes  by  the  employment  of  a  lower  rate 
than  is  charged  by  direct  routes  between  the  same  points. 

Much  has  been  said  in  relation  to  the  importance  of  a  uniform 
classification  of  freight  throughout  the  land.  A  common  classifi- 
cation even  in  a  single  state  requires  concerted  action.     Every 


286  RAILWAY  ASSOCIATIONS. 

article  of  merchandise  must  be  taken  up  and  considered  with  rela- 
tion to  the  various  considerations  embraced  in  the  establishment 
of  its  just  and  reasonable  classification;  in  addition  to  this  the  de- 
velopment of  the  traffic  of  every  line  must  be  kept  in  mind,  and 
the  classification  of  each  commodity  must  be  sufficiently  low  to 
permit  of  its  free  movement.  Prior  to  the  passage  of  the  act  to 
regulate  commerce  thirty- seven  different  classifications  were  in 
use  in  the  territory  of  the  Central  Traffic  Association.  The  great 
bulk  of  interstate  traffic  throughout  the  United  States  is  now 
handled  under  four  classifications.  The  progress  which  has  been 
made  in  this  direction  would  have  been  impossible  but  for  the  fact 
of  the  existence  of  railway  associations,  in  which  the  subject  has 
been  efficiently  handled.  At  the  present  time  a  conference  of  rep- 
resentatives of  all  the  associations  is  in  existence,  meeting  from 
time  to  time  and  engaged  in  the  work  of  still  further  simplifying 
and  harmonizing  the  present  differences,  with  a  view,  if  possible, 
to  ultimately  establish  a  single  uniform  classification  of  freight. 

The  subject  of  the  apportionment  of  receipts  from  joint  traffic 
between  the  various  lines  which  unite  to  form  through  routes  is  one 
of  the  utmost  importance  to  the  carriers,  but  in  which  the  general 
public  has  little  interest.  Shippers  are  concerned  solely  with  the 
question  of  the  rate  which  they  are  required  to  pay  as  an  aggre- 
gate through  rate  from  the  initial  point  to  the  point  of  destina- 
tion. The  division  thereof  between  the  various  roads  which  unite 
in  performing  the  service  is  of  no  consequence  to  the  public,  al- 
though of  great  consequence  to  the  carriers.  These  divisions 
have  been  and  are  a  constant  subject  of  negotiation  and  modifica- 
tion. In  determining  the  share  of  a  through  rate  which  any  given 
link  will  receive,  a  great  variety  of  elements  are  taken  into  account. 
A  common  basis  where  the  lines  participating  in  the  division  are 
relatively  equal  is  that  of  mileage,  under  which  the  through  rate 
is  prorated  according  to  the  length  of  the  various  roads.  This 
basis,  however,  is  by  no  means  universal.  Weak  lines,  or  roads 
where  the  traffic  is  light  and  expenses  are  high,  are  accustomed 
to  claim  and  are  usually  conceded  an  additional  allowance  in  the 
division  of  the  earnings  upon  through  traffic.  Sometimes  this 
concession  takes  the  form  of  an  arbitrary  allowance  for  an  expen- 
sive bridge,  or  for  a  mountainous  haul;  sometimes  an  arbitrary 
mileage  is  assigned,  one  and  a  half,  twice  or  even  thrice  the  ac- 
tual mileage  of  the  line  in  question ;  sometimes  an  arbitrary  divi- 
sion of  the  total  through  rate  is  awarded,  under  which  a  short 
branch  line,  or  feeder,  may  receive  one  third  or  even  one  half  of 
the  total  income;  sometimes  the  adjustment  is  made  upon  the 
relative  local  rates  charged  in  different  sections  of  the  country,  so 
that  roads  where  traffic  is  thin  and  low  rates  are  impossible,  divide 
with  other  lines  having  a  heavy  tonnage  and  low  freight  charges 
upon  the  basis  of  the  sums  received  by  each  respectively  for  their 
local  traffic.     These  matters   are  necessarily  the  subject  of  fre- 


RAILWAY  ASSOCIATIONS.  287 

quent  negotiation,  and  are  often  adjusted  between  large  sections 
of  the  country  east  and  west,  or  north  and  south,  by  concerted  ac- 
tion through  the  associations  which  represent  the  lines  in  the 
various  sections  involved  in  the  question.  It  often  occurs  that 
lines  are  willing,  for  the  sake  of  increasing  their  own  traffic,  to 
concede  to  their  connections  a  larger  share  in  the  earnings  of 
joint  business  than  would  naturally  accrue  to  them.  Lines  having 
more  than  one  outlet  are  sometimes  able  to  sell  their  traffic  to  the 
highest  bidder.  Som.e  standard  is  usually  adjusted  for  a  consider- 
able extent  of  territory,  designed  to  effect  an  equitable  distribu- 
tion of  the  results  of  joint  traffic  between  the  lines  of  which  va- 
rious through  routes  are  composed.  Were  it  not  for  the  existence 
of  associations  where  understandings  already  reached  are  main- 
tained, and  necessary  changes  are  effected  from  time  to  time,  con- 
fusion would  at  once  arise  and  chaos  would  speedily  folUow. 

The  advantages  to  shippers  and  passengers  arising  from  the 
through  billing  of  freight,  and  through  tickets  under  the  coupon 
system,  need  not  be  enlarged  upon. . 

The  importance  of  the  inspection  of  freight  is  found  in  the  fact 
that,  without  it,  advantages  would  be  continually  obtained  by  ship- 
pers as  against  each  other.  It  becomes  necessary,  therefore,  to 
establish  bureaus  not  controlled  by  individual  roads,  which  would 
be  under  the  constant  inducement  of  permitting  preferences  in 
order  to  obtain  traffic,  but  organized  under  associations  of  carriers 
where  interest  requires  that  the  rules  of  shipment  be  universally 
and  equally  applied  to  all.  This  inspection  service  includes  the 
examination  of  freight  at  various  points  for  the  purpose  of  ascer- 
taining that  it  is  properly  classified ;  that  the  established  rates  are 
duly  applied,  and  that  the  weight  is  accurately  given.  The  law  is 
very  stringent  in  its  reqiiisition  that  all  rates,  rules  and  regulations 
shall  be  strictly  observed,  and  even  imposes  a  penalty  upon  ship- 
pers who  misdescribe  their  freight  for  the  purpose  of  obtaining  lower 
rates.  Notwithstanding  these  provisions  of  the  statute,  the  month- 
ly reports  of  the  various  inspection  bureaus  now  in  operation,  and 
which  should  be  largely  increased,  show  hundreds  of  cases  of  dis- 
crimination and  fraud  which  are  corrected  by  the  carriers  through 
their  agency. 

COMPETITIVE    TRAFFIC. 

Coming  now  to  the  field  of  competitive  traffic,  a  branch  of  the 
subject  is  reached  in  respect  to  which  great  sensitiveness  exists  in 
the  apprehension  of  the  public.  There  can  be  no  doubt,  however, 
that  this  feeling  largely  arises  from  a  failure  to  clearly  understand 
certain  principles  which  lie  at  its  foundation,  or  at  least  from  the 
fact  that  the  subject  is  usually  viewed  from  one  side  only.  The 
desirability  of  the  preservation  of  competition  will  not  be  denied, 
but  it  should  not  be  forgotten  that  in  transportation  there  may  be 
too  much  competition,  as  well  as  too  little ;  for  example,  competi- 


288  RAILWAY  ASSOCIATIONS. 

tion  between  railroads  and  water  lines,  which  proceeds  to  the 
extent  of  driving  the  latter  out  of  existence  as  channels  of  com- 
merce, can  hardly  be  claimed  to  be  for  the  best  interest  of  the  public 
at  large ;  and  the  same  thing  may  be  true  of  competition  between 
competing  railroad  routes. 

In  other  words,  competition  as  a  fact  cannot  be  preserved  unless 
the  necessary  agencies  for  competition  are  maintained.  To  turn 
loose  upon  the  same  field  of  operations  several  wealthy  corporations, 
with  the  requirement  that  they  must  forever  compete  and  that 
under  no  circumstances  shall  concerted  action  be  allowed,  would 
presently  result  in  the  extinction  of  one  or  more  of  them.  This 
has  been  so  often  practically  demonstrated  in  cases  where  compe- 
tition between  rival  roads  has  driven  the  weaker  to  the  wall  and 
resulted  in  its  absorption  by  lease  or  other  form  of  combination, 
and  the  extinction  of  the  competition  originally  proposed,  that  its 
statement  has  become  a  truism. 

Again,  adequate  railway  service  requires  the  maintenance  of  the 
road  and  its  equipment  in  the  most  perfect  and  efficient  form, 
together  with  the  constant  provision  of  employes  of  the  highest 
skill  obtainable.  Good  public  service  cannot  be  rendered  unless 
the  rates  are  adequate  to  its  support,  and  adequate  also  to  insure 
the  continuance  in  the  field  of  the  necessary  capital.  Whenever 
carriers  fail  to  harmonize  their  conflicting  interests  by  the  adop- 
tion of  corresponding  tariffs  a  war  of  rates  ensues,  and  in  every 
rate  war  the  public  as  well  as  the  carriers  must  suffer.  It  is  a 
common  idea  that  competition  means  lower  rates  and  nothing 
more.  On  the  contrary,  competition  may  exist,  and  does  exist, 
where  rates  are  well  maintained.  The  very  fact  that  different 
routes  are  open,  of  itself  presents  the  essential  element  of  compe- 
tition. The  facilities  and  advantages  of  competing  routes  are  the 
subject  of  selection  by  shippers  and  passengers  while  rates  may 
be  alike  on  all.  It  cannot  be  denied  that  the  public  generally  is 
more  interested  in  safe  and  efficient  railway  service  than  in  ex- 
tremely low  railway  rates.  Rates  may  easily  be  so  low  as  to  ren- 
der such  service  impossible.  The  public  is  best  served  by  rates 
which  are  reasonable,  uniform  and  firmly  maintained.  This  is 
precisely  what  the  Act  to  regulate  commerce  demands.  English 
tribunals  have  affirmed  healthy  competition  to  be  that  in  which 
various  transportation  routes  are  kept  open  which  are  '  'practically 
independent  of  one  another,  fairly  alternative,  and  reasonably  cal- 
culated to  keep  one  another  in  check." 

Looking  at  the  question  of  competitive  rates  as  affected  by  the 
requirements  of  the  act  to  regulate  commerce,  it  will  easily  be 
seen  that  some  degree  of  concurrent  action  between  the  competi- 
tors is  indispensable.  Although  in  denouncing  discrimination  the 
act  in  terms  applies  to  individual  carriers,  a  moment's  reflection 
will  show  that  discrimination  in  rates  between  competing  carriers 
is  equally  prejudicial  to  the  public  interest.     Suppose,  for  exam- 


RAILWAY  ASSOCIATIONS. 


289 


pie,  that  there  were  only  two  lines  of  road  between  New  York  City 
and  Chicago,  and  that  the  charges  upon  one  were  twenty  per 
cent  lower  than  upon  the  other.  So  far  as  volume  of  traffic  is 
concerned,  the  immediate  result  would  be  to  turn  all  business  to 
which  a  choice  of  the  two  routes  was  open,  upon  the  road  giving 
the  lowest  rate,  but  so  far  as  the  manufacturing  public  is  con- 
cerned, every  establishment  situated  upon  the  line  of  the  other 
road  would  at  once  be  placed  at  a  disadvantage  impossible  to  over- 
come. Nor  is  this  confined  to  rates  alone.  If,  for  example,  one 
trunk  line  from  the  eastern  seaboard  to  the  west,  transports  sugar 
at  its  net  weight,  deducting  the  weight  of  the  barrels,  while  the 
regulations  in  force  upon  the  other  lines  demand  that  the  gross 
weight  shall  be  employed  in  applying  the  same  tariff  rate,  the  re- 
fineries upon  the  latter  roads  are  placed  at  a  disadvantage  suffi- 
cient to  exclude  them  from  the  territory  reached  by  the  other  line ; 
or  if  one  line  returns  without  expense,  tank  cars  furnished  by  ship- 
pers of  oil,  while  another  line  exacts  a  charge  for  the  return  of 
such  cars,  the  refineries  located  upon  the  latter  line  are  discrimi- 
nated against  to  an  extent  which  would  soon  close  their  works. 
Hundreds  of  instances  like  the  foregoing  might  be  readily  enumer- 
ated, in  which  the  failure  to  apply  similar  rules  and  regulations, 
as  well  as  similar  tariffs,  by  competing  lines  of  road  would  result 
almost  immediately  in  the  destruction  of  important  industries.  It 
is  absolutely  essential  that  discrimination  be  prevented  by  the 
formulation  of  rules,  regulations  and  tariffs  between  competing 
lines,  which  shall  work  out  exact  justice  to  the  patrons  of  all. 
This  is  one  of  the  results  accomplished  through  the  agency  of  rail- 
road associations.  It  may  be  said  that  by  preserving  absolute  in- 
dependence of  action  the  desire  to  secure  competitive  traffic  would 
compel  the  line  which  wished  to  maintain  a  higher  rate  to  reduce 
its  charge  to  the  basis  fixed  by  its  rival ;  but  this  would  not  neces- 
sarily follow,  and  if  it  did  follow  the  result  would  be  a  series  of 
reductions,  causing  great  disturbance  to  business,  and  ultimately 
resulting  in  the  elimination  of  one  or  the  other  of  the  competitive 
agencies. 

Again,  enlarging  the  field  of  vision,  and  taking  the  case  of  car- 
riers from  different  competing  points  to  the  same  markets,  or  from 
different  markets  to  the  same  field  of  distribution,  discrimination 
necessarily  produces  a  similar  result  to  that  above  described.  One 
point  or  the  other  is  excluded,  and  the  public  is  wronged.  The 
only  remedy  possible  is  the  establishment  of  a  corresponding  or  a 
relatively  equivalent  rate  to  or  from  the  different  points  in  ques- 
tion which  will  prevent  unjust  discrimination,  preference  or  advan- 
tage, and  serve  the  whole  public  equably. 

And  once  more,  consider  a  complicated  network  of  roads  which 
operates  through  a  wide  sweep  of  territory  in  which  the  products 
are  all  competitive  and  all  markets  are  common ;  the  law  leaves 
them  to  fix  their  rates  each  for  itself;  without  co-operation  the 

19 


290  RAILWAY  ASSOCIATIONS. 

transportation  charges  would  immediately  become  grossly  discrimi- 
native, and  in  the  end  almost  certainly  would  become  inadequate 
to  sustain  the  service,  while  inflicting  great  wrong  upon  innumer- 
able communities. 

Association  among  competitive  carriers  for  the  adjustment  of 
their  rates  and  their  traffic  regulations,  is  required  by  sound  public 
policy.  It  makes  possible  the  handling  of  traffic  which  is  competitive 
as  between  individuals  and  between  localities,  without  preference 
and  without  discrimination.  It  is  required  upon  similar  considera- 
tions to  those  under  which  towns,  cities,  states  and  the  nation  itself 
are  organized  for  concerted  action  in  matters  of  common  interest, 
and  for  the  prevention  of  anarchy.  It  establishes  rates  co-ordi- 
nated with  the  value  of  the  service,  which  are  necessarily  adjusted 
to  the  expenses  of  the  shortest  routes.  It  assists  to  preserve  all 
existing  lines  in  competitive  existence.  It  affords  an  organized 
support  to  the  enforcement  of  the  regulative  statutes.  Association 
is  tjie  servant  of  the  law.  Without  it  there  can  be  no  adjustment 
of  tariffs  made  which  will  conform  to  the  administrative  provisions 
of  the  act.  The  law  implies  associate  action  as  a  necessary  pre- 
requisite to  obedience. 

One  of  the  objects  of  association  among  competitive  carriers, 
therefore,  is  the  establishment  of  a  forum,  or  meeting  place,  where 
rates,  rules  or  regulations  governing  the  transportation  of  all  com- 
modities can  be  arranged  by  concurrent  action,  and  where  all  the 
elements  attending  the  fixing  of  rates  by  one  or  more  of  the  lines 
may  be  giv^n  full  force  in  reaching  the  resultant.  In  this  correla- 
tion of  forces,  the  most  direct  and  economical  route  dominates  the 
rest.  If  the  ruling  rate  thus  fixed  is  not  a  reasonable  one,  the  act 
to  regulate  commerce  provides  control. 

An  inspection  of  the  actual  work  taken  up  by  the  associations  at 
their  meetings  will  show  that  the  raising  of  rates  is  not,  by  any 
means,  their  important  function.  Undoubtedly  one  of  their  lead- 
ing principles  is  the  maintenance  of  rates  upon  a  durable  and  per- 
manent basis.  Proposed  changes  in  tariffs  are  discussed  in  asso- 
ciation meetings,  and  are  acted  upon  with  care.  Considerations 
based  upon  the  exigencies  of  business  and  the  stimulation  of  traffic 
are  those  most  frequently  urged,  while  the  necessity  for  the  main- 
tenance of  revenue  counterbalances,  to  some  extent,  the  pressure 
that  is  constantly  brought  to  bear  for  reductions  here,  there  and 
everywhere.  The  scale  of  rates  throughout  the  United  States,  as 
is  well  known,  has  been  constantly  shrinking  through  a  long  term 
of  years.  At  times  a  general  scheme  of  advancing  rates  ma}^  be 
devised  and  agreed  upon,  for  the  purpose  of  putting  an  end  to  a 
rate  war  or  of  taking  advantage  of  an  outside  condition  like  that 
which  arises  upon  the  annual  closing  of  lake  navigation ;  but  such 
advances  as  are  accomplished  are  usually  trivial,  arising  from  the 
lining  up  of  rates  previously  reduced  to  meet  some  special  emer-. 
gency,  or  from  the  removal  of  some  factor  of  disturbance.     The 


RAILWAY  ASSOCIATIONS. 


291 


general  tendency  is  always  in  the  direction  of  lower  rates.  In  re- 
spect to  this  matter  the  association  system  is  conservative.  It 
tends  to  check  unnecessary  reductions,  but  it  is  inadequate  to  stem 
the  tide  in  its  universal  ebb.  It  is  estimated  that  the  rate  changes 
considered  at  association  meetings  constitute  almost  one-half  of  the 
business  presented ;  and  that  about  ninety  per  cent  of  such  pro- 
posed rate  changes  are  propositions  for  reduction,  which  are  so 
accomplished  as  to  prevent  the  preferences  and  discriminations 
that  would  ensue  if  each  line  were  to  make  reductions  for  itself. 
At  the  present  time  the  usual  rate  question  is  in  respect  to  rela- 
tive rates.  It  is  claimed  that  the  rate  at  some  point  is  too  high 
when  compared  with  the  rate  at  some  other  point,  or  that  the  rate 
on  a  given  commodity  is  too  high  in  comparison  with  the  rate  upon 
some  analogous  article,  or  upon  the  same  article  from  other  sources 
of  supply.  A  complaint  that  rates  are  excessive  in  themselves,  or 
■  as  compared  with  the  value  of  the  service,  is  very  seldom  seriously 
made. 

CO-OPERATIVE    MANAGEMENT. 

Certain  distinctions  that  exist  between  the  business  of  transpor- 
tation and  other  branches  of  industry,  in  respect  to  the  practical 
effect  of  associated  management,  cannot  properly  be  overlooked. 
There  is  no  governmental  regulation  of  the  price  of  lead,  or  sugar, 
or  oil.  Manufacturing  and  mining  combinations,  presumably  in- 
tended to  restrict  production  and  increase  profits,  are  regarded 
with  suspicion  by  reason  of  the  fact  that  no  control  exists  upon 
the  prices  to  be  charged.  The  regulation  of  the  tariffs  of  common 
carriers,  on  the  contrary,  has  become  an  established  feature  of 
our  legislation  and  jurisprudence.  The  danger  apprehended  in  the 
one  case  is  altogether  absent  in  the  other. 

Another  marked  difference  between  railroads  and  other  busi- 
ness enterprises  lies  in  the  fact  that  if  the  latter  find  their  work 
unprofitable,  it  is  open  to  them  at  any  time  to  close  their  doors. 
The  loss  involved  is,  of  course,  serious ;  and  a  struggle  for  contin- 
ued existence  is  often  maintained  until  bankruptcy  ensues ;  but  the 
result  of  a  lockout  or  a  failure  is  confined  to  the  owners  and  the 
operatives  of  the  particular  plant  involved ;  the  public  are  supplied 
from  other  sources.  In  the  case  of  a  railroad  under  similar  circum- 
stances the  operations  of  the  road  can  seldom  stop.  The  road  must 
stay  in  existence,  and  the  courts  assume  its  operation  when  bank- 
ruptcy has  destroyed  the  value  of  the  original  investment.  New 
capital  is  brought  in  through  receivers'  certificates,  and  the  wheels 
continue  to  turn.  If  the  discontinuance  of  a  line  is  determined 
upon,  the  public  as  well  as  the  owners  and  operatives  suffer. 
Some  competitor  or  some  larger  system  has  usually  found  it  for  its 
interest  to  assume  the  operation  of  bankrupt  roads ;  but  several 
instances  of  abandonment  have  actually  occurred,  and  others  are 
in  sight ;  cases  even  exist  where  state  officials  are  seeking  by  legal 


292 


RAILWAY  ASSOCIATIONS. 


process  to  compel  the  maintenance  of  worthless  branches,  for  the 
benefit  of  the  local  communities  through  which  they  run. 

Again,  the  tendency  to  lower  rates  in  railroad  service  under  the 
stress  of  unregulated  competition  has  a  violence  of  which  citizens 
engaged  in  other  branches  of  business  are  wholly  ignorant.  It 
resembles  the  rush  of  the  cataract.  The  education  of  the  freight 
agent  has  been  in  the  direction  of  maintaining  tonnage  at  almost 
any  cost.  The  net  results  are  shown  in  the  accounts  of  the  oper- 
ating department,  which  is  separately  organized.  One  effect  of 
the  law  has  been  to  extend  the  scope  of  all  reductions  by  making 
general  what  was  formerly  restricted,  localized  and  often  secret. 
Where,  in  the  days  before  the  law,  a  single  rate  was  cut,  the  freight 
agent  must  now  reduce  a  tariff ;  and  while  he  points  with  pride  to 
the  increasing  tonnage  of  the  line,  the  loss  of  net  revenue  may  be 
excused  as  a  result  of  the  operation  of  the  statute. 

It  has  become  a  common  criticism  upon  the  present  form  of 
congressional  regulation  of  railway  traffic,  that  while  it  prevents 
discrimination  and  protects  the  public,  it  altogether  fails  to  protect 
the  carriers.  It  presents  no  method  of  restraint  upon  impecun- 
ious, extravagant,  speculative  or  unreasonably  aggressive  railway 
management ;  it  leaves  the  doors  of  competition  open  to  the  most 
circuitous  routes ;  it  puts  the  strong  lines  at  the  mercy  of  the  weak, 
and  makes  it  possible  for  a  road  that  should  never  have  been  built 
to  fix  rates  which  all  other  competing  roads  must  perforce  accept. 

And  this,  in  truth,  is  an  obvious  defect.  The  Congress  has  as- 
sumed the  task  of  making  provision  against  rates  which  are  unrea- 
sonably high,  and  rates  which  are  not  relatively  equal,  without 
providing  for  the  prevention  of  rates  unreasonably  low,  or  for  the 
protection  of  investments  which  now  form  an  immense  proportion 
of  the  country's  wealth,  represented  by  securities  which  are  not 
found  alone  in  the  vaults  of  capitalists,  but  which  in  many  cases, 
constitute  the  only  source  of  income  for  the  comparatively  poor 
and  the  otherwise  hopelessly  dependent.  The  scheme  of  govern- 
mental regulation  will  not  be  rounded  and  complete  until  this 
omission  is  supplied. 

State  ownership,  or  direct  national  control  of  the  railway  system 
of  the  country,  is  at  times  suggested  as  a  remedy ;  but  this  may 
be  at  once  dismissed  as  chimerical.  No  greater  injury  could  befall 
our  republican  institutions  than  the  establishment  of  a  branch  of 
the  public  service  which  would  throw  open  to  the  field  of  politics 
the  railway  service  of  the  land. 

Legislative  regulation  in  the  direction  of  the  prevention  of  rates 
unnecessarily  low  is  not  impossible,  although  it  has  not  been  seri- 
ously considered.  If  it  were  simply  to  take  the  form  of  a  provi- 
sion that  rates  once  established  should  not  be  reduced,  except'  at 
stated  periods  or  after  prolonged  announcement,  it  would  materi- 
ally improve  the  existing  situation  in  some  respects.  Such  re- 
strictions, however,  might  at  times  operate  unjustly,   and   occa- 


RAILWAY  ASSOCIATIONS.  293 

sionally  would  divert  traffic  for  a  time  into  unreasonable  channels. 
So  long  as  carriers  are  independent,  and  some  of  them  irrespon- 
sible, occasions  will  arise  where  prompt  action  may  be  necessary. 

The  theory  of  the  law  up  to  the  present  time  has  been  that  rail- 
way owners,  having  the  rate-making  power  in  their  own  hands, 
are  competent  to  protect  their  revenues.  If  the  premises  were 
correct  the  conclusion  would  follow ;  but  the  theory  is  applied  to 
a  situation  where  independent  action  by  six  hundred  different  car- 
riers is  preserved;  and  it  is  not  true,  as  a  practical  matter,  that 
any  one  of  them  can  control  its  own  rates.  On  the  contrary,  the 
rates  of  every  line  are,  to  a  greater  or  less  degree,  at  the  mercy  of 
its  rivals.  There  is  but  one  way  in  which  the  prosperity,  or  even 
the  prolonged  existence,  of  independent  railway  corporations  can 
be  maintained  under  existing  legislation ;  namely,  through  co-op- 
eration among  railways  themselves  in  preserving  their  tariffs  from 
destruction. 

This  co-operation  may  take  two  forms;  associate  action,  subject 
to  the  regulation  of  the  law,  or  consolidation  of  titles  and  control. 

Railway  consolidations,  or  ' 'trusts,"  as  they  are  often  unthink- 
ingly termed,  are  among  the  popular  bugbears  of  the  day.  Some 
of  the  distinctions  which  differentiate  them  from  the  "trusts"  that 
have  been  formed  in  other  directions,  have  been  alluded  to  above ; 
and  it  is  safe  to  say  that  no  consolidations  or  combinations  among 
railroads  are  imminent  at  the  present  time  which  are  likely  to 
operate  otherwise  than  favorably  to  public  interests.  But  the 
public  mind  is  aroused  upon  the  general  subject,  and,  while  usually 
just,  it  is  not  ready  to  distinguish.  It  is  undeniable  that  the  pres- 
ent time  is  not  a  favorable  one  for  the  unification  of  competing 
roads  in  common  ownership,  or  even  in  joint  control.  The  Ameri- 
can system  has  been  established  upon  a  contrary  basis,  involving 
the  maintenance  of  competitive  conditions.  As  a  last  resort,  and 
in  default  of  any  other  solution  of  the  question,  actual  immense 
consolidations  may  eventually  arise.  At  the  present  time  their 
necessity  has  not  been  demonstrated  to  the  public  eye,  and  their 
formation  would  arouse  antagonism  in  many  quarters.  As  has 
been  well  said,  however,  unless  railway  managers  can  associate, 
railway  owners  must  combine. 

When  revolutions  of  this  character  occur,  the  movement  is 
usually  sudden  and  unexpected.  The  association  experiment, 
which  is  now  in  progress  of  trial,  is  unmistakably  in  the  nature  of 
a  breakwater  against  the  so-called  railway  '*  trust."  If  this  fact 
can  be  clearly  recognized,  and  the  usefulness  of  railway  associa- 
tions sustained,  while  their  power  is  strengthened,  the  existing 
system,  for  a  time,  at  least,  can  be  preserved.  In  order  to  secure 
this  result  it  is  necessary  that  the  public  should  understand  the 
nature  of  their  work  and  their  value,  and  that  their  results  should 
receive  some  governmental  sanction.  Central  bureaus,  with  power 
to  establish  and  adjust  reasonable  rates  through  large  sections  of 


204  RAILWAY  ASSOCIATIONS. 

territory  where  traffic  is  competitive,  are  indispensably  required. 
This  is  going  far  "beyond  the  work  of  the  present  associations,  but 
the  matter  can  be  arranged  by  the  roads  among  themselves, 
through  the  employment  of  a  reasonable  amount  of  good  sense 
and  as  much  good  faith  as  usually  pertains  to  ordinary  business 
transactions,  provided  that  their  tariffs  continued  to  be  recognized 
2^^  prima  facie  just,  though  subject  to  proper  revision  and  control, 
and  their  arbitrations  are  supported  by  authority  for  the  enforce- 
ment of  awards.  In  controversies  between  man  and  man  an 
award  of  arbitrators  may  be  made  the  basis  of  a  suit  at  law,  and  a 
judgment  is  rendered  in  order  to  compel  the  payment  of  money  so 
found  due.  A  money  judgment,  however,  is  not  appropriate  to 
awards  between  competing  carriers.  They  relate  to  the  establish- 
ment of  rates,  the  adjustment  of  divisions,  and  the  preparation  of 
rules  and  regulations  for  the  conduct  of  traffic.  They  deal  with 
the  future,  not  the  past,  and  mandatory  process  is  required  for 
their  execution.  It  is  believed  that  an  amendment  to  the  sixteenth 
section  of  the  act  to  regulate  commerce  might  very  properly  pro- 
vide that  the  courts  of  the  United  States,  sitting  in  equity,  should 
entertain  jurisdiction  of  awards  rendered  in  arbitrations  between 
carriers,  or  between  associations  of  carriers,  respecting  interstate 
commerce,  and  should  have  power  to  enforce  them  by  any  appro- 
priate process,  subject  to  the  rules  which  govern  the  consideration 
of  awards  for  the  payment  of  money  in  courts  of  law. 

This  idea  is  not  novel;  in  1885  the  Railway  Commissioners  of 
the  state  of  Kansas  used  the  following  significant  language : 

"  Since  the  violent  fluctuations  of  rates,  consequent  on  rate  wars  between 
rival  lines,  result,  usually,  in  discriminative  benefits  to  a  few  at  the  ultimate 
expense  of  the  public,  means  should  be  taken  to  at  least  moderate  this  disturb- 
ing element  to  the  business  interests  of  the  country.  As  a  means  to  this  end, 
we  venture  to  suggest  that  contracts  or  agreements  between  rival  companies 
to  carry  on  interstate  traffic  upon  given  rates,  providing  those  rates  are  reason- 
able and  just,  should  be  invested  with  a  legal  status  and  be  enforceable  with 
appropriate  sanctions." 

In  the  same  year  a  somewhat  similar  thought  was  thus  stated 
by  Hon.  T.  M.  Cooley: 

"  The  question  then  presents  itself  whether  the  final  solution  for  the  '  rail- 
road problem '  is  not  likely  to  be  found  in  treating  the  railroad  interest  as  con- 
stituting in  a  certain  sense  a  section  by  itself  of  the  political  community,  and 
then  combining  in  its  management  the  state,  representing  the  popular  will 
and  general  interests,  with  some  definite,  recognized  authority  on  the  part  of 
those  immediately  concerned ;  much  as  state  and  local  authority  are  now  com- 
bined for  the  government  of  municipalities." 

The  wisdom  of  these  pregnant  utterances  has  been  demonstrated 
by  the  result  of  the  experiment  which  has  been  conducted  for 
nearly  three  years  upon  narrower  lines.  The  statesman  who  can 
effect  the  required  co-ordination  of  governmental  regulation  with 
associated  railway  management,  will  prolong  for  many  years  the 
American    system   of    universally   competitive  railway    service. 


RAILWAY  ASSOCIATIONS.  295 

Without  some  such  provision  the  statute  is  incomplete.  The  only 
other  natural  solution  of  existing  difficulties  appears  to  be  through 
actual  consolidations  of  ownership,  by  which  all  traffic  in  great 
sections  of  the  country  can  be  brought  under  the  control  of  a  sin- 
gle mind. 


